Privacy and Transparency Should be Balanced in Financial Disclosures!

  • The Right to Information (RTI) Act was a path-breaking law introduced to make public such information considered key to ensuring transparency as also timely dissemination for the consumption of common citizens. The RTI Act has worked wonders over the years is indisputable. However, the caveat surrounding the revelation for public consumption often stalls much vital information from getting revealed in a time-bound manner. Understandably, matters concerning national security and allied information surrounding the same cannot be revealed for obvious reasons. Of course, there are other equally important information vis-à-vis financial transactions that deserve to be known without compromising on privacy.

PC: Ayush Verma

  • As you are aware, India’s bank-dominated financial sector has often been in the news for the wrong reasons. A slew of big businessmen defaulting on the bank loans obtained in the last decade or so has considerably sullied the image of the banking sector. Consequently, these worryingly increasing big-ticket loan defaulters have forced the Reserve Bank of India (RBI) to address the matter on an urgent basis. Note that the nub of the problem bogging our financial institutions is sometimes financial statements of intermediaries concealing figures rather than revealing the same. Any inordinate delay in identifying hidden problems often leads to crises. The RBI and the lending banks are constrained to make good the losses that run into thousands of crores.
  • Against this backdrop, different stakeholders in the system from regulators to citizens using RTI, have tried to ensure greater transparency. Notably, this is an area that continues to offer stiff resistance despite no less than the Supreme Court interventions almost six years back seeking transparency in transactions. The matter has reached the Apex Court again where some overarching principles at stake need further deliberations and possible remedial measures. Note that the question here is not about the privacy issue at all as everyone is entitled to the same level as provided by the law. The debatable issue here is the nature and extent of disclosures that banks are mandated to make in the larger public interest.


  • It is not out of place to mention that the bank essays an intermediary role having raw material in the form of deposits raised from the public. Rightly, the RBI has stringent regulatory requirements to safeguard deposit holders and the financial system. It is found that banks sometimes fail to meet prescribed standards forcing the regulator to step in. One such move was when the RBI asked banks to make a public disclosure if the central bank’s estimate of NPA’s exceeded their own beyond a threshold. This was prompted when certain banks’ financial statements did not reflect the true picture. Also, transparency norms should keep evolving as per the prevalent circumstances.
  • A case in point is Yes Bank which was found declaring a net profit just six months before the RBI declared a moratorium on its operations in March 2020 leading to uncertainty and chaos amongst the depositors. It came to light that there was a material mismatch between its financial statements and the true state of affairs. Thus, it is incumbent on the part of the regulator to mandate more disclosures from its annual inspection report of banks without compromising on the privacy of individual accounts. Striking a balance between the two relevant factors should guide the regulator and the regulated, in this case, the banks. Interesting what the SC will rule on the matter.

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Krishna MV
Krishna is a Post Graduate with specialization in English Literature and Human Resource Management, respectively. Having served the Indian Air Force with distinction for 16 years, Armed Forces background definitely played a very major role in shaping as to who & what he is right now. Presently, he is employed as The Administrator of a well known educational institute in Bangalore. He is passionate about sharing thoughts by writing articles on the current affairs / topics with insightful dissection and offering counter / alternate views thrown in for good measure. Also, passionate about Cricket, Music – especially vintage Kannada & Hindi film songs, reading – non-fictional & Self-Help Books, and of course, fitness without compromising on the culinary pleasures.