Officials of the Reserve Bank of India (RBI) have no role to play in the sanctioning and post-sanction monitoring of large-value loans by banks, the RBI said in an affidavit submitted before the Supreme Court on Monday calling the claims as “fallacious”.
RBI said, “Large value credit sanctions in banks are generally taken by a committee of the board/senior management of the bank. The sanctioning of such credit is committee-based and not an individual decision. RBI nominee director does not have veto power in the credit sanctioning process.”
The affidavit came in response to a public interest litigation (PIL) filed jointly by former union minister and member of Bharatiya Janata Party (BJP) Subramanian Swamy and advocate Satya Sabharwal questioning the failure of Central Bureau of Investigation (CBI) to probe the role of RBI officials for their acts of omission and commission in such scams.
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The RBI affidavit filed on Monday said, “Bringing any individual to justice, RBI official or otherwise, there needs to be prima facie evidence for the investigating agencies to examine their role. It is for the investigating agencies to conduct an investigation as per the laid down procedures and applicable law. Most of the scams referred to in the present PIL are already under investigation by the CBI and Enforcement Directorate (ED). It is not for the petitioners to direct the course of investigations and decide the aspects which are to be pursued by the law enforcement agencies.”
A bench of justices BR Gavai and Vikram Nath heard the PIL on Wednesday and gave three weeks’ time to Swamy to respond to RBI’s affidavit. Swamy said, “There is a nominee director of RBI (in each bank) who is not included in any investigation, although he is a party to every decision sanctioning the loan.”
The RBI pointed out in its affidavit that directors were nominated by the centre in 12 public sector banks (PSB). In addition, RBI also appointed additional directors in certain private sector banks and primary (urban) cooperative banks.
Detailing the role of directors, the RBI said, “RBI nominee director has no role in the day-to-day affairs of the bank, including post-sanction monitoring of the loan for which the responsibility lies entirely with the bank management.”
It further stated, “Post sanction management and monitoring of loan, to ensure that the borrower satisfies all the terms and conditions of the sanction, including ensuring end use of funds for intended purposes, lies with the bank management.”
Solicitor general Tushar Mehta appearing for RBI told the Supreme Court, “The RBI stated that the scams referred to by the petitioner are being probed by CBI, ED. If there is complicity, they will investigate.” However, in the absence of any prima facie evidence being produced by the agencies or by the petitioner, trying to link the scams to the RBI officials is “fallacious and non-substantiated,” Mehta said.
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The petition highlighted a spate of financial or banking frauds in the recent past resulting in a huge drain on the national economy. “In the last couple of years, various banks reported scam after scam wherein the role of bank officials was clearly made out but surprisingly not even a single RBI official has been brought to justice despite RBI retaining the power to monitor, regulate, supervise, audit and direct the functioning of all banking companies in India,” the petition read.
Swamy listed out major scams currently being probed by CBI, ED, and the Serious Fraud Investigation Office (SFIO), which included the Kingfisher scam ( ₹9400 crore), Nirav Modi-Punjab National Bank scam ( ₹11,400 crore), Bank of Maharashtra scam ( ₹2043 crore), PMC Bank scam ( ₹6500 crore), Rotomac scam ( ₹3695 crore) among others. In the IL&FS scam, the SFIO in June 2019 charge-sheeted the company officials for defaulting on loan obligations worth over ₹91,000 crore wiping off a huge chunk of public revenue.
The petitioners demanded a CBI enquiry or a probe by any independent agency into the role played by the agency to unearth any failure on part of the RBI which resulted in these scams.
The RBI sought dismissal of the PIL as it said the investigations in these matters are pending before various courts. “All the above-referred incidents are already being investigated by competent investigating agencies. When an investigation into the offence of any scam takes place, it necessarily encompasses every individual involved in the commission of the offence being investigated including the officials of the respective bank/s, RBI (if any),” the affidavit said.
“There cannot be a separate and individual investigation qua the allegations made against one set of officials. It is always the offence which is investigated which includes the role of all persons who are involved. The prayer made in the petition thus deserves to be dismissed,” the RBI added.
The Supreme Court will take up the matter after four weeks.
