SC for disclosure of amount of outstanding loans, RBI resists

New Delhi

Default in repayment of loans running into “lakhs of crores of rupees” today prompted the Supreme Court to throw up the idea of making public the total outstanding amount without disclosing the defaulters’ names, but RBI resisted the proposal citing confidentiality clause.

“This information does make out a case. This is quite a substantial amount which is involved,” a bench, comprising Chief Justice T S Thakur and Justice R Banumathi, said after perusing the Reserve Bank of India’s list of companies and persons who had defaulted on bank loans of over Rs 500 crore.

Expressing concern over the ever-rising amount of loans “not being returned”, the bench said “people are taking thousands of crores and running away by declaring the company as insolvent, but poor farmers who take small amount of Rs 20,000 or Rs 15,000 suffer.”

“The total amount in default can be disclosed. Whoever be the defaulter, their names can be kept confidential but what is the total amount of default can be disclosed. Lakhs of crores of rupees are outstanding. Many of defaulters have more than Rs 500 crore and above to pay,” it said.

The bench also sought the assistance of Ministry of Finance and Indian Banks Association by making them parties and posted the matter for further hearing on April 26.

During the hearing, the RBI counsel cited provisions in the RBI Act and the Credit Information Companies (Regulation) Act, 2005, which mandate confidentiality of information.

The bench at the next hearing will be assisted by all the parties on the issues likely to be framed by them, including specifically the question whether “the total outstanding amount of loans defaulted can be disclosed or not.”

When advocate Prashant Bhushan, appearing for NGO Centre for Public Interest Litigation (CPIL), favoured disclosure of outstanding loan amount and cited the recent apex court verdict of December 2015 to claim that RBI has to provide all information, the federal bank’s counsel said that decision related to the Right to Information Act and would not apply in the case in hand.

The bench referred to the documents supplied by RBI in a sealed cover and said “the figures have gone up” since June 2014 and “these figures are not confidential.”

“The amount you have mentioned is outstanding. It is a large amount. If we go by your figure, the next question would be what are you doing for the recovery? What steps would be taken for recovery,” the bench said when a senior advocate, appearing for RBI, resisted the idea of making disclosure of the total outstanding amount on the ground that “disclosure of the figures will have the impact.”

When the bench wanted to know whether RBI had “immunity” over disclosing this information, the counsel cited the provisions in the Reserve Bank of India Act and The Credit Information Companies (Regulation) Act, 2005, which mandates confidentiality of information.

Solicitor General Ranjit Kumar also mentioned the provisions in Public Finance and Audit Act, 1983 on the issue of confidentiality.

The idea of formulating the issues came from the RBI, which said it was important keeping in mind the decentralisation of banks which had taken place in the past.

It was suggested that in view of decentralisation of the banks, they can be represented by their association or a collective body like the All India Bank Association.

“Banks should be represented. The question of non- performing assets (NPA) is involved,” the RBI said.

Taking note of the submission, the bench said “You (parties) formulate the points of questions. Also, include is there any confidentiality (issue) in disclosing the total outstanding amount.”

Going by the amount involved in default, it appears that the banks concerned are not monitoring its funds periodically, the bench said, adding “it is giving loans without getting it returned.”

“Are you (RBI) not supposed to keep a vigil and supervise how the loans have to be recovered. In how many cases you have taken action against those who have run away,” the bench asked the RBI counsel, who said “action has been taken”.

When the hearing was nearing an end, Bhushan referred to RBI Governor Raghuram Rajan saying “I thought that the present RBI Governor is a good man but I am surprised with the type of affidavit filed by the RBI.”

He also criticised the RBI Governor for issuing the circular not to disclose the list of wilful defaulters.

The bench stopped him short and said “that does not make him a bad man.”

The petition, which was filed in 2003 by the Centre for Public Interest Litigation (CPIL), had originally raised the issue of loans advanced to some companies by state-owned Housing and Urban Development Corporation (HUDCO). The plea had said that about Rs 40,000 crore of corporate debt was written off in 2015.

Earlier, the Supreme Court had directed the RBI to provide a list of companies which are defaulters of bank loans of over Rs 500 crore while expressing serious concern over the rise in bad loans.

The apex court had also asked the RBI to provide within six weeks the list of companies whose loans have been restructured under corporate debt restructuring schemes.

The bench had expressed surprise that no concrete steps were taken for the recovery of loan from the defaulters.

While passing the order, the court had taken note of a report in a national daily about bad loans or non-performing assets and the inability of the banks to recover them.

PTI