The RTI Act: RBI may need to rework communications strategy after SC order

Four days after a Supreme Court order ( in Girish Mittal vs Parvati vs Sundaram & Anr Matter) negated the RBI’s stand on RTI Act, the banking regulator came out with a new Disclosure Policy on April 30. As per the SC judgment, the Disclosure Policy, and the actions taken under it, would need to be in compliance with the decision of the Supreme Court in RBI vs Jayantilal N Mistry matter of 2015.

The Jayantilal judgement set out the balance that needs to be struck while disclosing information in relation to the banking sector, says L Viswanath, partner, Cyril Amarchand Mangaldas. “Hence, the implementation of the Disclosure Policy by the RBI would need to strike this balance when disclosing any information under the RTI Act,” he adds. The RBI had earlier withdrawn its April 12th Disclosure Policy.

RTI experts are elated with the apex court’s latest order that emphasised on the RBI’s statutory duty to uphold the interests of the public-at-large and the depositors. “For the RBI, which resisted the change for more than a decade, it is inevitable now for incorporating transparency in its regulatory administration. Any public body, for that matter, cannot hide their skeletons in opaque cupboards,” says M Sridhar Acharyulu, former central information commissioner and professor of constitutional law at Bennett University.

Going forward, the onus is on the banking regulator to secure public interest in checking the defects of banks to prevent financial scandals and corruption in public and private banks, he adds.

Experts say the apex court order has made it clear that the RTI Act gets precedence over all other Acts, including the RBI Act. “The only exceptions are those carved out in Section 8 of the RTI Act, which lists out various cases/circumstances in which a public authority need not disclose the information sought for,” says L Charanya, partner, Lakshmikumaran & Sridharan.

The RBI has sought to deny information regarding various banks on the ground that the disclosure would affect the economic interest of the country, competitive advantage of banks and also that the information being sought has been obtained by the regulator in its fiduciary capacity with banks. The apex court, however, rejected the argument that there is a fiduciary relationship between the RBI and its subject.

Experts expect the RBI’s legal team to put under closer scrutiny Section 8 of the RTI Act. “However, what falls within the ambit of Section 8 of the RTI Act is a matter of discussion,” says Nishant Singh, partner at IndusLaw.

What may influence the RBI’s Disclosure Policy is the apex court’s observation that “lower-level economic and financial information like contracts and departmental budgets should not be withheld under this exemption” he adds.

Rajeev Dewal, a banking sector legal expert, is of the view that the regulator may need to rework its communications strategy and the language used in bank inspection reports and other communications with banks.

Access to such reports by the public may pose challenges to banks if such reports and communications are used without sound contextual understanding, he adds.

The regulator's reports and communications with its subject should be more fact-based, justifiable and exact, and avoid vague and wide observations or remarks, feels Dewal.

Legal experts agree that the direction of the Supreme Court is premised on the idea of transparency and accountability.  “This certainly will boost accountability and transparency since the RBI now has no other alternative,” says Vijay Sondhi, partner, L&L Partners.

Caught in the crosshairs

• The Supreme Court’s judgment on April 26 is the result of  contempt petitions filed in relation with alleged disobedience of the directions issued by the court to the RBI
• This pertains to the SC’s judgment (on Dec 16, 2015) in RBI vs Jayantilal N Mistry on whether the information sought under the RTI Act can be denied by the RBI and other banks on the ground of economic interest, commercial confidence, fiduciary relationship and public interest
• The SC held that there is no fiduciary relationship between the RBI and its subjects 

The way forward

• The RBI’s Disclosure Policy has to undertake a stress test on its legal validity against the RTI Act
• The RBI has to proactively disseminate information, not only in compliance with the requirements of the RTI Act but also with the objective of achieving better corporate governance through higher levels of transparency and accountability
• The banking regulator has to ensure confidentiality of sensitive information and avoid disclosures that may lead to a violation of privacy