Opinion | Don’t smear all defaulters

Treating all businesses alike could deter honest businesses from taking risks, which would hurt economic activity and job creation

The Supreme Court has directed the Reserve Bank of India to release its list of wilful defaulters and disclose its annual inspection reports of banks under the Right to Information (RTI) Act. This should grant transparency to what has been shrouded by legal uncertainty.

The RBI has so far refrained from doing so, arguing that it has a fiduciary—or a quasi-judicial—duty towards banks not to reveal individual debt details. It has also argued that naming all defaulters might shame honest-but-troubled businesses in public. The apex court, however, has rejected its arguments. Under its order, RBI cannot deny people such information on the ground that it falls under exceptions of the RTI law.

The larger problem here has to do with popular perceptions of a default. Unfortunately, people at large tend to paint all businesses with the same brush, viewing them as criminals if they default on debt repayments. The cases of Vijay Mallya and Nirav Modi, who are absconding from Indian law, seems to have prompted people to see all businesses with an eye of suspicion.

But that isn’t fair. Not all businesses meddle with their accounts and falsely portray themselves as unable to repay loans. There are indeed businesses that genuinely fail in honest ventures and deserve to be distinguished from those that commit fraud by diverting borrowed funds to personal accounts.

Treating all businesses alike could deter honest businesses from taking risks, which would hurt economic activity and job creation. That would be an outcome that does India no good.

Close