Bad Loans: Supreme Court's stern warning to Reserve Bank to disclose details under RTI law will herald a new chapter of transparency in India's banking system. Supreme Court’s direction to the RBI to disclose its annual inspection reports under the Right to Information (RTI) law is expected to eventually reveal the names of large wilful defaulters whose names have not been made public so far. RBI has traditionally argued that the information is available with the bank in fiduciary capacity and if it parts with the information then it will amount to breach of trust. However, the apex court had already rejected the view taken by the RBI in a judgement delivered in December 2015. The apex court also directed the RBI to review its policies for implementing the RTI law as the bank has routinely stonewalled the requests for public disclosure of information in the past. The Apex court said the RBI was duty bound to disclose the information. “Any further violation shall be viewed seriously,” the bench led by justice L Nageswara Rao said. However, it took the apex court nearly three and a half years to issue the strict warning to the Reserve Bank. In December 2015, the Supreme Court had directed the RBI in Reserve Bank Of India vs Jayantilal N. Mistry case to disclose the information related to wilful defaulters. However, despite clear direction by the top court of the country, the Bank was able to drag the matter for more than three years. It is not yet clear when the RBI will comply with the apex court’s order or will take some other step including filing review petition to delay the disclosure of protected interests. Why public disclosure about wilful defaulters is crucial The steep rise in non-performing assets or bad loans of commercial banks is a sensitive issue in the country. It has a direct bearing on the health of banking and financial institutions. Both the ruling BJP and opposition Congress, which was in power between 2004 to 2014, have blamed each other for the problem of rising cases of loan defaults. According to the latest information given by the government in Parliament in February this year, bad loans or non-performing assets of public sector banks have been estimated at Rs 10.09 lakh crore or 10.03% of the total loans of commercial banks in December 2018. Public Sector Banks, that are custodian of public money, account for nearly 85% of bad loans. In response to a question in the Rajya Sabha, the government had said that the primary reason for a steep rise in NPAs that rose from 2.3% in 2008 to 11.2% in March 2018, were aggressive lending practices, willful default, loan frauds, corruption in some cases and economic slowdown. Prime Minister Narendra Modi has often blamed previous UPA governments for the mess accusing them to exert undue pressure on banks to give loans to big companies. Prime Minister Modi coined a term for the phenomenon, calling it ‘phone-banking’ to allude that during the UPA period, government banks gave loan to big business houses after receiving telephone calls from powerful individuals. On the other hand, Congress President Rahul Gandhi has often blamed Prime Minister Modi for not doing enough to prevent big defaulters like Vijay Mallya, Nirav Modi and Mehul Choksi from fleeing abroad during NDA government. What information will be disclosed? A RTI applicant Sandeep Singh Jadoun has sought the list of willful defaulters with loan value of Rs 50 crore or above. He also sought the names of borrowers, date of sanction among other things which was denied to him. Prior to that in 2016, the Supreme Court had already directed the Reserve Bank to disclose the names of companies that owed loans worth over Rs 500 crore and have defaulted on repayment or their loans were restructured under the Corporate Debt Restructuring Scheme (CDR ). By then, while hearing a batch of petitions related to RTI appeals, the Supreme Court had already held in December 2015 that the RBI cannot claim exemptions under section 8 (1) e of the RTI Act that exempts public authorities from disclosing the information held by them in ‘fiduciary capacity’. These provisions were inserted in the RTI Act to prevent any trade secret or sensitive information of a business from being disclosed to a competitor or from falling into wrong hands. However, like several other public authorities, the RBI has often used it to disclose the information of great public importance. The stern warning issued by the Supreme Court on Friday will not only reveal the names of large wilful defaulters owing more than Rs 50 crore or more but it will also lead to disclosure of reports of annual inspection reports of banks. It will be helpful in fixing the responsibility. The details that will be disclosed will also cover other information like the date of sanction of the loan, the loan amount, details about project for which the loan was sanctioned among other things, it will end the politics and blame game between political parties. Will truth be revealed? If the Reserve Bank complies with the directions of the Supreme Court and Central Information Commission, and if it follows the mandate of proactive disclosure under section 4 of the RTI Act of 2005 then it will bring out the truth of bad loans or non-performing assets before public. However, the RBI’s record under different governors and successive governments does not inspire public confidence. While commenting on the RBI’s tendency to avoid public disclosure of this sensitive information, the central information commission in its November 2018 judgement had observed: “The RBI has a strong legal team with experienced legal experts…, has audacity to openly defy RTI Act, CIC directions and judgement of the Supreme Court.” It’s still not clear whether the RBI will comply with the Supreme Court’s today’s direction or will explore any other legal or statutory avenue that might be available to the bank. The bank is yet to publicly react to the apex court’s order.