The 500 crore untouchables, also known as loan defaulters


Provision to defame those farmers who have not repayed their loans by publishing their photographs or publish details of IT defaulters or cases filed against invidiuals or companies who have defaulted – these were all part of the questions our dear parliamentarians discussed during the Loksabha Q&A session. And when it came to the defaulters over 500 crores, they invoked section 45 E of the RBI act, an act that was created in 1934 and a section probably introduced by the British to protect the wealthy from any liabilities.

Reserve Bank of India (RBI) has submitted to the Hon’ble Supreme Court a list of defaulters above Rs.500 crore in a sealed cover claiming that the said information is confidential, as it is exempt from disclosure under Section 45 E of RBI Act. The supreme court in its 2015 judgement clearly stipulated what RBI can and cannot do

  • RBI is supposed to uphold public interest and not the interest of individual banks.
  • RBI is 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.

The information which may be withheld include the following:

Information which is in national economic interest, disclosure of information about currency or exchange rates, interest rates, taxes, the regulation or supervision of banking, insurance and other financial institutions, proposals for expenditure or borrowing and foreign investment could in some cases harm the national economy, particularly if released prematurely.

However, lower level economic and financial information, like contracts and departmental budgets should not be withheld under this exemption

However, where information is required by mandate of law to be provided to an authority, it cannot be said that such information is being provided in a fiduciary relationship.

SC-Ruling

 

Exhibit I:

Whether there is a provision to publish photographs and names of farmers in the defaulters list of banks to defame people who could not repay their loan amount due to certain reasons and if so, the details thereof

Reserve Bank of India (RBI) has reported that they have not issued any specific instruction in this regard. In terms of RBI’s Master Circular on Wilful Defaulters dated 01.07.2015, instructions have been issued to Banks /Financial Institutions (FIs) with regard to:-

  • Penal measures to be initiated by the banks and financial institutions against the willful defaulters, which inter-alia provides that no additional facilities should be granted by any bank/FI to the listed willful defaulters; and the legal process, wherever warranted against the borrowers / guarantors and foreclosure for recovery of dues, should be initiated expeditiously.
  • Criminal action against willful defaulters

Wilful-Defaulters

(a) whether income-tax department has identified large number of potential defaulters;
(b) if so, the details thereof and the action taken or proposed to be taken in the matter;
(c) whether huge amount of taxes are pending against Government owned insurance companies; and
(d) if so, the details thereof and the steps taken or proposed to be taken to recover the amount, company-wise?

Exhibit II:

Information about high value financial transactions available with the Income-tax Department was analysed to identify the number of Permanent Account Number (PAN) holders who have undertaken these transactions but have not filed return in the relevant Assessment Year. In this regard, the following action has been taken:-

(i) Such information has been made available to the concerned PAN holder(s) on the ‘Compliance Module’ on the e-filing portal of the Income-tax Department. The PAN holder will be able to submit the response electronically and keep a printout of the submitted response for record purposes.

c) and (d) Data of outstanding tax dues, pending collection/recovery is not maintained centrally in all the cases. However, cases where outstanding demand exceeds Rs. 10 crore is monitored by the Central Board of Direct Taxes. The details of outstanding dues exceeding Rs. 10 crore pending collection/recovery, as on 30.06.2014, of Government owned insurance companies has been annexed. Raising of demand and collection and recovery of outstanding dues is a continuous process.

Outstanding-Loans

 

Section 45-E of the RBI Act, 1934, which prohibits disclosure of credit information.

Exhibit III:

whether the public and private sector banks have filed cases in courts against loan
defaulters/companies in the recent past;

(a) &(b): The legal mechanisms available to lenders for recovery of their loans are outlined in
The Recovery of Debts Due to Banks & Financial Institutions (RDDBFI) Act, 1993, The
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 & Lok Adalats. The details of cases filed along with the outstanding amount for the last three years for Scheduled Commercial Banks (SCBs) under these channels are as follows:

Cases-Loans

Reference:

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