The Reserve Bank of India (RBI) has said it has no power to ask banks to share information on customers with third parties, including investigative agencies of the government, even if it is in the interests of the bank.
The banking regulator’s response followed a request by the Directorate of Revenue Intelligence (DRI), which sought RBI’s assistance in obtaining information from two state-owned banks on the alleged Rs 29,000-crore overvaluation of coal imports from Indonesia by Indian companies, including the Adani Group, ADAG and Essar Group among others.
“…it may be stated that there is no statutory provision which enables RBI to decide about the permissibility of sharing of customer information by any bank with third parties, irrespective of whether it is in the interests of the bank or otherwise,” said a letter dated May 24 sent by the RBI to D P Dash, Director General, DRI.
Hurdle in coal probe
The DRI had sought import documents negotiated by SBI’s Singapore branch and BoB’s Dubai branch with Indonesian suppliers in its probe into alleged overvaluation of coal imports. The agency says these documents contain the actual price of coal before it was allegedly inflated.
The RBI said the decision to share information lies with the banks, which would be responsible for their actions in case of any dispute.
While two private banks, ICICI Bank and Axis Bank, have shared all information with DRI on the case citing national interest, government-owned State Bank of India (SBI) and Bank of Baroda (BoB) have declined to do so citing the confidentiality clause. The DRI has been asking the regulator and the banks to share information since 2016.
In May 2016, the then Revenue Secretary, Hasmukh Adhia wrote to the chairpersons of SBI and BoB asking the banks to co-operate with the DRI investigation. At that time, then SBI chairperson Arundhati Bhattacharya declined to share the documents from the Singapore branch.
Subsequently, the DRI escalated the matter of non-cooperation by public sector banks to the Prime Minister’s Office (PMO), which issued an office memorandum to the secretary of Department of Financial Services (DFS). On September 23, 2016, the DFS informed PMO that it has asked the RBI to look into the issue.
Since then, the DRI has written to the RBI multiple times – the last communication was in September 2018. In its reply on May 24, the RBI has asked DRI to explore diplomatic or legal channels to get the information from the banks.
Interestingly, the DRI probe into the alleged overvaluation of coal imports began in December 2014, under the then revenue secretary Shaktikanta Das, who is now the Governor of RBI. However, the agency’s probe has not progressed since 2014 due to non-cooperation of the banks.
Adhia, who had once actively pursued the matter with SBI and BoB, was appointed as chairman of BoB in March. The bank, however, is yet to share information with the DRI.
The DRI’s attempt to gather information through legal and diplomatic channels such as issuance of letter rotatory (LR) for gathering information abroad has also been halted after Adani Enterprises Ltd, challenged the procedure of issuance of LRs in the Bombay High Court and obtained an interim stay.
The DRI probe into the imports of Indonesian coal began in December 2014. In March 2016, the agency issued a general alert to its field formations across India, outlining the modus operandi of over-invoicing of coal imports from Indonesia.
The DRI alleged that money was being “siphoned” outside the country and the electricity-generating firms were availing of “higher tariff compensation based on artificially inflated cost of the imported coal”.
The DRI alleged that Indonesian coal was directly imported from ports in that country to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.