Is the RTI Act affecting the performance of Banks adversely?

A committee constituted by the Reserve Bank of India (RBI), India's Central bank, has recently submitted its report after reviewing the governance of banks in India. This report is accessible at: http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/BCF090514FR.pdf

What is problematic with this report?

I find the Committee's attitude towards the Right to Information Act, 2005 (RTI Act) very disturbing. The Report blames the RTI Act as one of the several external constraints on the governance of Public Sector Banks (see Section 2.7, page 33). The Committee has found that coverage under the RTI Act inhibits the Public Sector Banks' (PSU Banks) ability to compete with their counterparts in the private sector as the latter are not covered by the same law. 

So the Committee recommends that the external constraints be addressed first by the Ministry of Finance before addressing the internal weaknesses that affect the competitiveness of PSU Banks (see Recommendation #2.2 at page 34).

What do publicly available facts indicate?

Only 20 of the 30+ nationalised Banks have submitted their RTI returns to the Central Information Commission (IC), through their parent Ministry- Ministry of Finance, for the year 2011-12. Statistics for the year 2012-13 are not available as the CIC has not yet published its latest Annual Report. A quick analysis of the number of RTI applications received by these 20 PSU Banks in 2011-12 is attached.

The available data indicates that, on an average, the maximum number of RTI applications per branch received by a PSU Bank during this period  is an ‘astronomically high’ 2.25 applications for Allahabad Bank followed by the Bank of Baroda at an average of 2 RTI applications per branch. Several Banks have received an average of less than 1 RTI application per Branch during this period. Of course this is only a statistical picture because some branches including the head office would have received many more applications than the average. Nevertheless the point that I am illustrating here is that work-wise there is simply no logic to the Committee's claim that the Banks are burdened by RTI applications. The RTI burden in those branches receiving more applications than others could be reduced by appointing more Public Information Officers. Surely Bankers know this solution better than their customers.

Further, the highest percentage of rejection of RTI applications in the same year was 52.9% by the State Bank of Hyderabad followed by 41.5% by Vijaya Bank. Corporation bank alone had not rejected a single RTI application and the lowest rejection rate was 6.4% for the UCO Bank. Most other PSU Banks had rejected between 13%-50% of the RTI applications.

With such low average figures for receipt of RTI applications and such high rejections rates, it is not clear how the RTI Act can be treated as a constraint on the governance of public sector Banks. The Committee has simply failed to explain its point.

Information About Non-Performing Assets:

The Committee starts its Report by stating that the financial position of PSU Banks is fragile and that capital is significantly eroded with the proportion of stressed assets rising rapidly. The obvious reference here is to bad loans that these banks have given out in the past. The size of the non-performing assets (NPAs) of these 20 Banks as on March 2013 as reported by the RBI is high. 

When I filed two rounds of requests for information about NPAs of 10 PSU Banks, almost every Bank rejected the request on grounds of commercial confidence, fiduciary relationship (that much abused exemption) and/or personal privacy (2 Banks have not replied yet). So these Banks are not willing to reveal to citizens who deposit their hard earned money with them as to who has defaulted on loans. Yet the Committee goes ahead and reports that the RTI Act is a constraint on the governance of PSU Banks. Of course I will be appealing some of these decisions of rejection and the resolution of the dispute will be a five-year plan going by the pendency and delays at the CIC.

What we as citizens need to debate and oppose is this trend of blaming everything bad on the RTI Act. No Bank secrets have been disclosed under the RTI Act till date. This shows the strength of the legitimate exemptions under the RTI Act which the Committee fails to recognise. We as civil society actors must challenge the Banks to show how RTI has adversely affected their performance in objective terms. Until then such criticism of the RTI Act must be treated as merely a case of overflowing of the bile due to an unhealthy lifestyle. We could however wish them- Munnabhai style: “Get well soon”.

Venkatesh Nayak

The remaining Banks have sent their reply. Union Bank at least provide me the total amount of NPAs against the top 20 defaulters which is Rs. 3,350 crores. The entire set of NPAs has been restructured. Indian Overseas Bank has taken the trouble of giving a detailed reply while rejecting my request. I will be filing the necessary appeal of course.

Venkatesh Nayak