Bank secrecy at the expense of the right to privacy?

On September 30, 2022, the Supreme Court expressed reservations with its own 2015 judgment in the Jayantilal N Mistry case, requiring banks to make public under the Right to Information (RTI) Act details of defaults of bank borrowers and inspection reports on such cases. . The Apex Court came to this conclusion in favor of a reassessment in light of the right to privacy established as a fundamental right by a panel of nine judges in the KS Puttaswamy case, popularly known as the Aadhaar case by the following, in 2017. The court therefore decided to consider the plea of ​​the banks against the RBI circulars issued for the disclosure of details, under the RTI law, in accordance with the judgment of 2015 because they retrospectively disagreed with the right to privacy.

“The only remedy available to the petitioners (a group of banks) would be to apply to this court by way of a written petition under Article 32 of the Constitution for the protection of the fundamental rights of their customers, who are citizens Indians,” the Apex court continued to observe. Banks are likely to lap up eagerly.

The private banks led by HDFC further argued that the RTI Act does not apply to private entities like them as they are not public authorities under the law and therefore information relating to these banks /IF and to their customers and employees cannot be sought/provided under the law. the RTI law, not to mention the confidential/sensitive information of these banks/FIs.

RTI and the right to privacy are antithetical, but in a country where banks grapple with the thorny issue of non-performing assets (NPA), naming and shaming may be necessary. The Municipality of Ahmedabad not long ago claimed remarkable success with its prescription of going to town with the loud announcement of the names of municipal tax defaulters accompanied by drumbeats to attract attention. attention of the neighbors on the defaulters.

It is estimated that up to 13% of public sector bank loan amounts are locked up in NPAs, a euphemism for bad debts. The late Arun Jaitley, former finance minister, once joked that tax avoidance cannot be anyone’s birthright. The same goes for bank loans, borrowers often intending not to repay but willing to embezzle funds through the labyrinthine practice of multi-layered money laundering which ultimately results in the funds disappearing. in distant tax havens with bank secrecy laws introduced and where the mandate of the Indian government does not work.

It’s not just the denunciation and shaming, but the huge stakes that the taxpayers of this country have in PSOs – especially given the government’s periodic recapitalization of taxpayers’ money after cutting deadwood, that is, the capital wiped out by write-offs made to clean up their balance sheets — this lends legitimacy to the increased public interest in banking. So the banks owe taxpayers an explanation of what got them to this sad pass, who took them for a ride and for how much. The fact that defaulters are repeat offenders, often in cahoots with bank officials in the dastardly and persistent way, makes a very strong case for not glorifying them with touch-me-not status.

It is respectfully submitted that the Supreme Court opened the proverbial Pandora’s Box of Pandora’s Box by taking cudgels for defaulters. And how? By asking banks to take the cudgel on behalf of defaulters. It’s strange to say the least. Can we see banks with vital interests in loan recovery advocating for the rights of defaulters who wronged them? Doesn’t this boil down to the worst conflict of interest, even the abdication of functions?

After all, India does not have an explicit bank secrecy law in Switzerland. The right to privacy, like the right to liberty, of which it is a subset, is accessible to law-abiding citizens. Can a life-sentenced prisoner invoke the right to liberty and demand immediate release without having served his sentence? Likewise, the right to privacy and bank secrecy is only available to those who operate within the four corners of the law. Do people like Vijay Mallya and Nirav Modi have the right to be left alone and smile at banks and taxpayers, their cheeky flaws glossed over?

In September 2017, the government froze some 2,000 bank accounts of shell companies suspected of harboring money laundering loot. Surely the nation has a right to know who are the people who hold the progress of the nation to ransom. India, it bears repeating, is not Switzerland with the constitutional guarantee of banking secrecy and the pride of numbered accounts which give anonymity to various crooks and despots who have defrauded their nations of their resources by underhanded means and deposited the ill-gotten money in his banks.

Private banks may not exactly be funded by taxpayers’ money, but they should be accountable to their public shareholders. It is dishonest for the private sector to claim greater immunity from disclosure on the grounds that it is not dependent on government donations as in the case of PSOs. Private banks can claim immunity from RTI but cannot get rid of their own shareholders.

Certainly, the fiduciary relationship underlies the relationship between banks and customers, but this argument cannot be extended to put an end to financial or white-collar crimes. Not in a nation that has fallen victim to Swiss intransigence in not exposing the crooks behind its legendary bank secrecy laws. The Supreme Court did well to separate the fundamental right to privacy from the broader fundamental right to liberty. It is respectfully urged and prayed that it does not create yet another right – this one being the right to bank secrecy.

The writer is a freelance columnist for various publications and writes on economic, business, legal and tax issues.