 "A photo of RBI headquarters in Mumbai (pic: Kamlesh Pednekar)")
The Reserve Bank of India (RBI) is against sharing original granular level data that it gets from banks and other market sources with the proposed Financial Data Management Centre (FDMC), a data warehousing company that will act as a central repository of information on all financial entity.
While some has ascribed the central bank’s reticence to a turf war to maintain its position as the premier regulatory body in the country, a closer look suggests issues of data privacy driving the RBI’s no-compromise attitude.
According to people familiar with the matter, the main reason for RBI’s reluctance is the confidentiality clauses of banks that the central bank is supposed to upheld. RBI, under normal circumstances, is not obliged to share confidential client information of banks with anybody (which rule also applies to other data collectors).
For example, say those who are familiar with the data collection policy, when the Ministry of Corporate Affairs shares its data with other regulators, it does so after omitting the names of the individual companies. The data, more often than not, is for research and analysis purposes for the regulators to take a call on the economic health of the country.
The only exception to this rule, which even the RBI has to adhere to, is when a law enforcement agency has to get particular granular level data on an individual company for investigation purpose.
However, as per the procedure, the investigative agency then has to approach the Court first to get an order to request the data from the regulators or the Ministry of Corporate Affairs.
But there could be other exceptions too.
For example, the Supreme Court in December last year chastised the central bank for its unwillingness to share data of defaulters.
“RBI is clearly not in any fiduciary relationship with any bank. RBI has no legal duty to maximize the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them. RBI has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector,” said a bench of the Supreme Court.
Although there is a clear distinction between wilful defaulters and regular accounts, experts say the government, as the owner of public sector banks, can have all the data it wants from these banks. However, it has only has limited rights over the data of private and foreign banks.
“Why would a private bank and a foreign bank share their client data with an agency who would be accessible to all? These banks can easily contest the government’s willingness to pry on their private data,” said a person familiar with the matter.
If the government or any other bodies have to access all the data they want, then the RBI Act, which has several confidentiality clauses, have to be amended. And that would be a complete collapse of RBI’s autonomy, say experts.
Besides, there is a genuine concern about overstepping on RBI turf, which may not be a healthy practice.
“If another agency has the right to collect the same data as that done by RBI and then the agency becomes a regulator, then what is RBI for?,” said another person aware of the issue.
RBI raised objections to the clause of allowing FDMC access to all kinds of data at the last meeting of the Financial Stability and Development Council (FSDC), an inter regulatory and government body, on 29 August.
The creation of FDMC was first discussed by the Financial Sector Legislative Reforms Commission (FSLRC) in 2014, while the Union Budget earlier this year first proposed to create the data warehouse as a statutory body. However, given RBI opposition to the idea, the government could be in mood to upgrade the statutory body into a full-fledged regulatory body.
This, then, could take the dispute between the RBI and the government to a different level altogether.
