How the RBI Dodged RTI Appeals For Minutes Of Meeting On Demonetisation.

After two years of stubborn refusal to part with any details regarding the minutes of its board meeting on demonetisation, the RBI has demonstrated its sheer disdain for the RTI Act. While India’s leaders make a mockery of the constitution and the economy, the Reserve Bank of India made a mockery of the Right to Information Act. Why should the RBI, which is supposed to be an independent financial regulator, suppress its minutes on demonetisation, illegally deny them under the RTI Act and then leak it to the media at a time convenient to them? When a citizen sought the minutes of the RBI meeting on demonetisation, the public information officer (PIO) denied the information citing arbitrary reasons. Even after a journalist accessed the minutes and reported on it in November 2018, the PIO didn’t relent and refused to release the information to the RTI requestor.

The citizen was made to wait until a second appeal was listed before a new central information commissioner in February 2019, where, again, the officials refused to part with the copies of minutes. The PIO pleaded to national security reasons under 8(1)(a) for denial.

The Central Information Commission (CIC) rebuked the RBI, on February 18, for “perfunctory handling” of an RTI application and sought records of its board meetings where the issue of demonetisation was deliberated upon and issued a show-cause notice to its central public information officer (CPIO). Only then did the CPIO of the RBI release the minutes of the meeting after withholding it for two years. Activist Venkatesh Nayak of the Commonwealth Human Rights Initiative (CHRI) had sought records of all the meetings of the RBI’s central board of directors along with the papers, presentations and other documents placed before it, which resulted in the decision to implement demonetisation on November 8, 2016, by Prime Minister Narendra Modi.

As usual, the RBI refused to give any information and cited the exemption clause from section 8 (1) (a) of the RTI Act. The section exempts from disclosure any information which would prejudicially affect the sovereignty and integrity of India and the security, strategic, scientific or economic interests of the state with relation to any foreign state or lead to the incitement of any offence. Nayak then approached the CIC. During the hearing before the CIC in February 2019, the RBI’s representative accepted that the information “prima facie was wrongly denied.” Venkatesh had sought information on two points: First: The copies of the minutes of the meeting of the RBI’s Board of Governors and any recommendation that was submitted regarding the demonetisation exercise to the central government.

The copy was sent after two years, after the CIC pulled it up. Nayak said that the RBI’s board had “essentially only rubber-stamped the government’s initiative.” Nayak’s second point pertains to petitions, recommendations or any communication submitted by any person, entity or organisation to the RBI regarding demonetisation and all the replies that the RBI had sent to such entities in addition to seeking copies of all the file notings and correspondence in this regard. The CPIO quoted Sec 7(9) to deny this information, ignoring that it is not an exception but facilitation to give information. First, they used section 8(1)(a) and then section 7(9) of the RTI Act to deny the information. Hardly any information can be called “sensitive” when the minutes of the demonetisation meeting is concerned. The investigation In an investigative report the Indian

Express, after accessing the minutes of the RBI board meeting, which was held hurriedly at 5:30 pm on November 8, 2016, stated that minutes revealed that the board had warned the government of its adverse effects in the short term. The report by Ritu Sarin also said that the board did not agree with the government’s justification that demonetisation would extinguish black money and counterfeit notes. The prime minister had repeatedly cited these two grounds as the key objectives of demonetisation in various meetings and in his address to the nation.

Another media report from the National Herald stated that the timing of the report, barely 10 days before the RBI Board met again to discuss the government’s proposal that called on the RBI to dip into its reserves and transfer an amount, speculated to be in the range of one to three lakh crore of rupees, to the government for public spending before the election, is significant. The National Herald asked, “Is the ‘leak’ of the two-year-old minutes of the meeting meant to reassure people that the central banker remains prudent and would once again place on record its reservations and allow the Government to bite the bullet? Or is it meant as a message to the government that more ‘leaks’ of the government’s intent, proposals etc. could be embarrassing in an election year?” This report further said that “the disclosure of the two-year-old minutes of the board meeting, something that the RBI had steadfastly refused to share till now, is clearly designed to salvage the reputation of the central banker and the RBI governor Urjit Patel, who had been accused of meekly succumbing to the government.”

The minutes also reveal that the RBI was aware of the adverse impact the move would have on growth, GDP, the medicare sector, tourism and the informal economy. It also reveals that the RBI Board had warned the government, in writing, which no one cared to consider. RBI cautions against the negative impact on GDP The minutes of the 561st meeting of the RBI’s central board, which was convened hurriedly in New Delhi at 5.30 pm on 8 November 2016, revealed that the central bank’s directors described the move as “commendable” but also warned that demonetisation “will have a short-term negative effect on the GDP for the current year.” Analysing these minutes, the Indian Express reported that, in less than four hours before Prime Minister Narendra Modi announced demonetisation on November 8, 2016, the central board of the RBI gave its approval to the scheme but also rejected, in writing, two of the key justifications for the move — elimination of black money and counterfeit notes. These minutes were signed by the then RBI governor Urjit Patel on December 15, 2016, five weeks after the meeting was held.

The RBI board also recorded six objections, which were described as “significant observations”. The RBI directors, after receiving a proposal draft of the scheme from the Ministry of Finance on November 7, 2016, argued that the government’s reasoning, that the withdrawal of HD (high denomination) currency notes of Rs 1,000 and Rs 500 would help in curbing black money and restrict circulation of counterfeit cash, did not really hold up. Most of the black money is in real estate Referring to the pretext that demonetisation would curb the flow of black money, the minutes recorded the facts and figures given in the government’s white paper on black money and noted, “Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real-estate and… this move would not have a material impact on those assets.” Regarding fake currency, the ministry informed the board that counterfeiting is on the rise in denominations of Rs 1,000 and Rs 500, and the total quantity of fake currency is estimated to be around Rs 400 crore.

The RBI Board further explained that “while any incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation in the country is not very significant”. Among the other objections, the board recorded that the growth of the Indian economy and its linkage to the high amount of HD currency in circulation, as pointed out in the government’s proposal, was flawed since the rate of inflation had not been taken into consideration. The minutes also pointed out that “the growth rate of economy mentioned is the real rate while the growth in currency in circulation is nominal. Adjusted for inflation, the difference may not be so stark. Hence, this argument does not adequately support the recommendation…” and warned of a negative impact, saying “the withdrawal of HD currency notes would have a negative impact on two sectors in particular: medical and tourism.”

It suggested that private medical stores should also be included in the exemption list. Describing the problems that incoming tourists would encounter, the RBI directors pointed out that, “arriving domestic long distance travelers who may be only carrying high denomination notes will be taken by surprise at railway stations/airports for payment to taxi drivers and porter charges and hence put to hardship. It would also have an adverse effect on tourists.” The RBI governor, however, saw a positive feature. He said: “the proposed step also presents a big opportunity to take the process of financial inclusion and incentivising use of electronic modes of payment forward as people can see the benefits of bank accounts and electronic means of payment over the use of cash…” Finally, the RBI agreed with the withdrawal of banknotes of Rs 1,000 and Rs 500, with some assurances.

“The board was assured that the government would take mitigating measures to contain the use of cash… the board considered the memorandum and after detailed deliberations concluded that in the larger public interest, the balance of advantage would lie in the withdrawal of legal tender status of Rs 500 and Rs 1,000 currency notes currently in circulation…” Black money reports not for the public The Union finance minister recently stated in parliament that black money study reports may be made available to MPs who sit on the Department-related Parliamentary Committee on Finance but they would not be placed in the public domain. The government ignored the proviso underlying Section 8(1) of the RTI Act that information which cannot be denied to the parliament or state legislatures cannot be denied to a citizen. Who will be liable for the lives of more than a hundred citizens that were lost in queues outside banks to exchange their hard-earned money? M. Sridhar Acharyulu is a former Central Information Commissioner and a professor of media law at Bennett University. This article was first published here


RBI did not do proper auditing: CVC on PNB fraud

Central Vigilance Commissioner K V Chowdary today said the Reserve Bank of India (RBI) had apparently not conducted an audit during the period of time when a Rs 13,000-crore scam hit the Punjab National Bank.

Chowdary stressed the need to put into place a more robust auditing system.

“They did not do this (an audit),” the head of the probity watchdog told PTI.

The CVC exercises superintendence over the CBI which is looking into the over Rs 13,000-crore PNB fraud case.

The RBI had the regulatory responsibility for the banking sector but any lack of integrity would be looked at by the Central Vigilance Commission, he added.

Chowdary said according to the RBI, it had switched over from a periodic audit to a “risk-based” audit which is conducted when there is a financial risk involved.

“To determine risk, they must have some parameters. Based on that they would have done that (auditing). (But) there was no apparent audit by the RBI during this period (of fraud),” Chowdary said.

Union Finance Minister Arun Jaitley had in February slammed regulators for failing to detect the fraud, saying that unlike politicians, regulators in the Indian system were unaccountable.

Chowdary pointed out that the RBI issues general guidelines as a regulator and also when foreign exchange is involved.

“They are not going to see from branch to branch and bank to bank what they are supposed to do,” he said.

It was primarily the responsibility of the banks to ensure that their business was conducted in a proper and ethical way, he added.

He said when something goes wrong, “one cannot blame everybody”.

“There is a systemic issue (here). They (RBI) have decided instead of every year or every once in two, three or four years, they will do it (risk-based auditing).

“It is a good policy. But how they determine the risk parameters… and why this (fraud) did not come up are matters of detail,” Chowdary said.

He, however, clarified that it was not just the PNB where an alleged fraud had taken place or that other banks were “100 per cent correct”.

“But we have to only hope that they (the other banks) have a better system and that they are following the system,” Chowdary said.

On a bank’s role in checking frauds, Chowdary said there are “no timelines” when it comes to deeper decision making processes.

“There should be defined timelines. The preventive vigilance mechanism has to be strengthened. The guidelines and operating procedures have to be strengthened. It has to be ensured that they are followed,” he said.

Asked about the investigation in the PNB scam, he said what the CVC was doing in the case could not be disclosed now as “it is work in progress”.

“There are so many issues that the CVC is examining both with reference to processes set in motion by the RBI,” Chowdary said.

The CBI is among various agencies looking into the over Rs 13,000-crore fraud allegedly committed by billionaire jeweller Nirav Modi and his uncle and Gitanjali Gems promoter Mehul Choksi.

PNB fraud: Centre opposes plea for SIT probe

The Centre today opposed in the Supreme Court a PIL seeking an independent probe and deportation of billionaire jeweller Nirav Modi in the over Rs 11,000 crore PNB fraud case, saying an FIR has been lodged and a probe was on.

A bench comprising Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud said it would not say anything on the matter now and listed the PIL filed by lawyer Vineet Dhanda for further hearing on March 16.

Attorney General K K Venugopal, appearing for the Centre, said he was opposing the PIL on various grounds, including that an inquiry has started after the FIR was registered.

The PIL has made Punjab National Bank, Reserve Bank of India and the ministries of finance and law and justice as parties. It has sought a direction for initiation of deportation proceedings against Nirav Modi and others allegedly involved in the banking fraud, preferably within two months.

The plea has asked for a special investigation team (SIT) to probe the banking fraud, allegedly involving billionaire jewellers Nirav Modi and Mehul Choksi. It has also sought a probe into the role of the top management of the Punjab National Bank (PNB).

The CBI has already registered two FIRs — one on January 31 and another a few days ago — against Nirav Modi, his relative Mehul Choksi of Gitanjali Gems and others for allegedly defrauding the PNB of about Rs 11,400 crore.

The plea has sought a direction to the finance ministry to frame guidelines on the grant and disbursal of loans involving big amounts.

“Issue an appropriate writ, order or direction directing the Finance Ministry and the RBI to frame guidelines in granting of the loan of the 10 Crores and above to ensure safety and recovery of such loans,” the PIL has said.

It has also sought the setting up of an experts’ body to deal with cases of bad banking debts in the country. Besides, the petition seeks framing of rules for the recovery of loans from the defaulters within a stipulated period, even by attaching their properties and auctioning them in the open market.

In his PIL, Dhanda has asked for a direction to fasten liabilities on the employees of a bank for sanctioning loans on the basis of deficient documents and said loans should also be recovered by attaching the properties of such bank officials even after their retirement.

Another plea filed by Sharma on a similar issue has not come up for hearing yet.

Sharma, in his plea, has said the SIT should consist of retired judges of the apex court and said that the banking fraud has caused serious injury to the general public and the state’s treasury. It should be investigated not by an agency “being controlled by the political leaders/authorities”, he has said.

The plea has alleged that loans were issued in the case without following RBI’s financial rules and regular systems.

Source : PTI

Gujarat HC raps RBI for giving directions to NCLT

Gujarat HC raps RBI for giving directions to NCLT
Gujarat HC raps RBI for giving directions to NCLT

The Gujarat High Court today rebuked the Reserve Bank of India for asking the National Company Law Tribunal in its June 13 directive to give priority to the insolvency proceedings against companies with huge debts.

It also questioned the functioning of the central bank.

The bench of Justice S G Shah came down heavily on the RBI for stating in its press release dated June 13, 2017 that the Insolvency and Bankruptcy Code (IBC) proceedings against companies with outstanding dues of more than Rs 5,000 crore “will be accorded priority by NCLT.”

Essar Steel had moved the high court challenging the RBI order to banks.

The court also questioned the “functioning” of the RBI for its decision to issue the press release in which it had directed banks to initiate insolvency proceedings against defaulting companies.

“The RBI has to be careful while issuing press releases, it must be in consonance with the Constitutional mandates, based upon sound principles of law, but in any case should not be in the form of advise, guidelines or directions to judicial or quasi-judicial authorities in any manner what so ever,” the court said in its order.

Further reacting to the central bank’s submission that it has no document on record based on which the decision to issue press release was taken, the court said, “This goes to show the manner in which the RBI is functioning, in as much as there is a press release even without a decision at certain level that press release is to be published and what should be included in such press release.”

“This is also an equally serious issue. It has been conveyed to the respondents that on such disclosure that there is no other document, pursuant to such disclosure, now, they would be debarred from relying upon any such document, if any,” it added.

The court interpreted RBI’s statement in its press release that “such cases (for insolvency proceedings) will be accorded priority by the NCLT” that the tribunal “has to give priority to cases filed by the directives of RBI against the cases, which are filed by other creditors or petitioners before the NCLT.”

The RBI even tendered an apology to the court saying that the statement was made due to “poor drafting” of the press release, and even issued corrigendum on July 8, to delete the line.

Through in a press release dated June 13, the RBI had directed banks to launch IBC proceedings against companies with outstanding dues of more than Rs 5,000 crore, and for other NPAs, banks should finalise resolution plans in the next six months.

During its submissions, the central bank had apologised from the court for issuing that statement in the press.

Essar Steel had moved the high court seeking the court’s direction to quash the RBI’s direction to the banks to initiate insolvency proceedings against it.

( Source – PTI )

Rs 1.58 cr sent to Solapur coop bank for teachers’ salary

Rs 1.58 cr sent to Solapur coop bank for teachers' salary
Rs 1.58 cr sent to Solapur coop bank for teachers’ salary

The Reserve Bank today informed the Bombay High Court that it has transferred a sum of Rs 1.58 crore to Solapur District Cooperative Bank for disbursal of salaries to aided school teachers.

“We have sent Rs 1.58 crore to the Solapur district bank for disbursal of salaries to the teachers. The money can be transferred to the teachers’ accounts or cheque payment can be made. If the bank or any district cooperative bank needs money for payment of teachers’ salaries, they can contact the SBI branch concerned and the request will be considered,” RBI’s counsel Venkatesh Dhond said.

The statement was made after a division bench of Justices A S Oka and Anuja Prabhudessai had last week asked the RBI to consider the issue of payment of salaries to aided school teachers, as it is disbursed through district cooperative banks which have been prohibited from exchanging or depositing new currency notes following demonetisation.

The Mumbai, Solapur, Nashik and Pune District Central Co-operative Banks had earlier approached the high court challenging RBI circular of November 14, restricting them from exchanging or depositing old currency notes of Rs 500 and Rs 1,000, which were declared as illegal tender under the government’s demonetisation move on November 8.

The bench was today informed by Additional Solicitor General Anil Singh that the Supreme Court will tomorrow hear a transfer petition filed by the Union government seeking for all petitions pertaining to the demonetisation move to be heard by SC itself or any one high court.

The high court today posted the cooperative banks’ petition for further hearing on December 19.

( Source – PTI )

Cap on withdrawals from ATMs policy decision

rbi-reduces-free-atm-withdrawals-in-metro-citiesThe Reserve Bank of India has told the Delhi High Court that the cap on the number of withdrawals from ATMs by banking customers without being charged is a policy decision taken in public interest.

A bench of Chief Justice G Rohini and Justice Sangita Dhingra Sehgal was also informed by RBI that the ATM facility was made available with a view to reduce “cash usage and increase electronic transactions in the country”.

RBI was responding to a public interest litigation (PIL) filed by advocate Swati Aggarwal, seeking directions to allow banking customers to make an unlimited number of transactions free of any charge on their own bank ATMs.

India’s central banking institution, which controls the monetary policy of the rupee, however, opposed the PIL, saying it is “not maintainable and is liable to be dismissed, as RBI has not violated any laws of the land”.

“The PIL is not meant to be a weapon to challenge the financial or economic decisions which are taken by the RBI in exercise of their administrative/ statutory powers and in the public interest…,” RBI’s counsel said.

On this, the bench has asked the RBI to file an affidavit with regard to its contention made before it by next date of hearing, December 5.

The RBI’s oral submissions were made after the high court on last date of hearing had questioned its decision to put a cap on withdrawals by banking customers using their ATM cards, saying account holders were being “unnecessarily taxed”.

As per RBI’s new guidelines, bank customers in six metros — Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru — are allowed to withdraw money free of charge only five times a month and every transaction beyond this limit will be charged Rs 20 per use.

Court stays information panel’s order to RBI on RTI plea

The Delhi High Court Friday stayed an order of the Central Information Commission (CIC) directing the Reserve Bank of India to provide information regarding credit provided to industrialists by nationalized banks to a Right to Information (RTI) applicant.

Justice Vipin Sanghi also issued notice to the RTI applicant, P.P. Kapoor, seeking his reply before the next date of hearing on Feb 27, 2012.

Contending that the CIC’s order will have a far reaching impact, senior counsel T.R. Andhyarujina, appearing for RBI, said: ‘This kind of information is confidential.’

He argued that the Information Commissioner has dealt with the matter in a wrong way, without considering all the relevant provisions under the RBI Act.

Questioning the jurisdiction of the CIC under the transparency law to pass such a direction, Andhyarujina said that the bank was exempted from providing any such information under section 8(1)(a) of the RTI Act.

‘It is not open to the CIC to issue the direction under section 8 (2) of the RTI act, when the RBI is exempted under section 8 (1) (a). Providing information to CIBIL (India’s first credit information bureau) is entirely different from providing the same to ordinary citizen as former is a government recognized body entitled to collect credit information,’ he argued.

In his application, Kapoor had sought information regarding amount of loan taken by industrialists from Indian nationalised banks and not repaid, along with interest accruing on such unpaid loans.

He had also sought details of the top 100 defaulters.

The CIC had Nov 14 directed the RBI to provide the information sought by the applicant by Dec 10.