Cites data leak fears that may impact concerned businesses.
The Reserve Bank of India (RBI) has refused to share information about nonperforming assets (NPAs) and loan defaulters sought by the Securities and Exchange Board of India (Sebi), according to media reports.
Notably, Sebi had asked for the information last year. It is being said that the apex bank’s reluctance to share sensitive information is due to its apprehensions that the data may be leaked in the public domain and would hurt the business prospects of the companies concerned.
Media reports said that Sebi had sent at least two official requests to the banking regulator asking for such details to be used as evidence in the ongoing investigations. The information sought includes a disclosure lapse by a highly indebted company, a corporate governance violation at a leading private bank and a frontrunning case in another private bank.
According to the media, the Central Information Commission (CIC) has sent a show cause notice to the RBI governor for not providing a list of big defaulters despite the Supreme Court’s instructions.
The cases with Sebi include a company that is alleged to have withheld information that it had defaulted on a loan repayment. Another case with Sebi is of frontrunning by some brokers before NPA numbers of a private lender were announced. In this case the role of the bank is under the scanner as it is suspected that some bank insiders had shared the information with the brokers.
As the jurisdiction of Sebi and RBI often overlap, the two regulators are known to share a wide range of information in several areas such as the debt market, foreign portfolio Investors (FPIs) and oversight of listed banks.
Generally, Sebi receives information within two weeks of its request to RBI and the information exchange is smooth between the two.
RBI’s reluctance on this particular piece of information may stem from the fact that data leak can happen due to the process followed by Sebi. Notably, all the data that Sebi receives from various regulators including RBI is documented and filed along with investigation reports pertaining to cases. Sebi is obliged to share the evidence with the accused if required and this increases the chances of potential information leak.
It is pertinent to note here that NPAs are considered unpublished price sensitive information (UPSI) in cases pertaining to insider trading and front running. If the indebted company is listed, it is its responsibility to disclose this information to the stock exchanges. The past two years has thrown up instances of several banks witnessing sharp stock movements ahead of earnings announcements amid heavy speculation on NPA numbers. Sebi is probing the leak of such numbers through social media platforms.
For now, whether Sebi gets the requested data hinges on the outcome of the ongoing tussle between the RBI and the CIC.
In 2015, the Supreme Court had asked RBI to comply with an order passed by CIC asking the regulator to disclose the loan default data. A positive verdict in favor of CIC will force RBI to share the data with Sebi as well. In case the order is in favour of RBI, Sebi will need to find other supporting evidences. As is apparent, there seems to be an absence of a common information exchange platform for Indian regulators.