Underlining that 87 persons owe more than Rs 85,000 crore to public sector banks (PSBs), the Supreme Court said on Monday that the Reserve Bank of India (RBI) should not work in the interest of the banks but in the interest of the country which calls for disclosing the names of the biggest defaulters.
After going through a list of defaulters submitted in a sealed cover envelope by the RBI, a bench led by Chief Justice of India T S Thakur disclosed that there are 87 individuals who owe Rs 500 crore or more to the banks and bad loans on account of their default to repay totalled Rs 85,000 crore.
“See this amount…if we had asked for details of those who owe Rs 100 crore, this could be another Rs 1 lakh crore…why should we not put the names of these defaulters in public domain? The RBI publishes a list of wilful defaulters every year. It does not matter whether they are wilful defaulters or not but they certainly owe Rs 500 crore and more to the banks… people may have a right to know,” said the bench, also comprising Justices D Y Chandrachud and L N Rao.
RBI was asked to explain the huge amount of loans written off by PSBs in the last five years after the top court took suo motu cognizance of The Indian Express report dated February 8, 2016, that Rs 1.14 lakh crore had been written off as Non-Performing Assets (NPAs) by 29 state-owned banks in the last three years.
Arguing in connection with a PIL over alleged irregularities in advancing loans by the Housing and Urban Development Corporation Limited, advocate Prashant Bhushan had adduced a copy of the report on bad loans and write-offs published by The Indian Express.
Opposing the disclosure of names, counsel appearing for the RBI argued that there are some clauses of confidentiality in law that might not support such disclosure. But the bench shot down this argument, saying: “What confidentiality? You have borrowed money from a public sector bank and you are not paying back. How is that confidential? And how does that affect the RBI? It may affect the credibility of the person concerned if people know he owes such huge sums but why should RBI be concerned? We will make it clear all of them are not wilful defaulters but their names should become known to public.”
The RBI’s counsel, however, responded that the Indian Bank Association was also a party to the case and they, being a representative body of management of banking in India operating in India, should be given an opportunity to put forth their stand on why disclosing the names is not the right option. “RBI is only working in the interest of these banks. We only supervise,” he said.
At this, the bench retorted: “You should work in the interest of the country and not in the interest of the banks. Disclosure of information regarding bad loans running into crores is in the interest of the country. People have taken money and they are not paying back. You should ask them to pay back. That is in the interest of the country.”
Asking the RBI counsel to prepare well for the arguments, the court fixed the hearing on Friday, saying it would take a call on disclosing names of the biggest defaulters of bad loans. “We will examine this on Friday and you come prepared for arguing. Why should their names be withheld? You will have to explain why should we hide this information from public which definitely has an interest in knowing who are these people,” it said.
Solicitor General Ranjit Kumar said that the Union Government had nothing to say about disclosing the names since it was a matter between the RBI and the PSBs. On the aspect of examining the causes of bad loans and the mechanism to recover, he said that a five-member committee had been set up in May and the final report is likely to be ready by end October.
Bhushan, however, objected to the constitution of the committee, pointing out that three of the five members were Managing Directors of the PSBs. “They are the problems themselves. It is under their regime that the problem has occurred. How will they provide the solution or hold others accountable? There must be some independent financial experts or retired senior banking personnel,” he said.
When asked by the bench, Bhushan said that somebody like former RBI Governor Raghuram Rajan could be made a part of this committee. But the bench responded: “He was also here for four years as RBI chairman when all this happened like the other MDs of banks…and now he is in Chicago. We cannot ask him to come back now. Let this committee prepare a report and submit it to us by November 15 and then we will see what additional directions are required.”