SEBI headquarters
REUTERS/Shailesh Andrade

The looming retirement of India's information czar has hit Sebi's prospects in a tussle with the central bank over its demand for bank loan defaulters' data.

Reserve bank of India governor Urjit Patel has time until November 26 to reply to a notice central information commissioner Sridhar Acharyulu issued over his failure to part with data under the Right to Information (RTI) Act, media reports say.

But Acharyulu, who overruled the other members on the RBI's powers to withhold information to the Central Information Commission (CIC), will be retiring on November 20.

The situation brings in several imponderables with the position that the new information czar takes likely to affect the fate of the notice to the RBI governor and Sebi's attempt to elicit information for the RBI.

The Sebi had got repeatedly snubbed by the RBI over its requests for the list of bank defaulters while probing insider trading on some banks' stocks, an Economic Times report said.

The central bank's reason for refusal to part with the information has been fear of data leakage which could affect the business of the companies involved, sources say. The RBI believes such data are of an extremely sensitive nature.

Sebi reportedly sent at least two requests seeking information that could become key evidence in its investigations. The information apparently includes disclosure lapses by an indebted company and the violation of corporate governance laws by a leading private lender.

The CIC served a show cause notice on RBI governor Urjit Patel for failing to honour a Supreme Court order that directed him to share a loan defaulters' list.

On the other hand, Sebi has been probing the cases of some brokers involved in front-running ahead of the public disclosure of NPA numbers of a private bank. The case is that some bank insider shared vital information with the brokers enabling them to fraudulently make money.

The key regulatory bodies have overlapping jurisdiction over banking and share information on the debt market, foreign portfolio investors (FPIs) and banking oversight. The interactions have in the past have been smooth, a Sebi source told the newspaper.

The RBI's worry is that when SEBI files the data it receives from the central bank with the investigation reports, which are liable to be shared as evidence with the accused, the chances of a leak increases.

"A potential NPA or a loan becoming NPA might not always mean the end of business for the defaulting company. Hence, disclosing the data could potentially affect the ability of the company to carry out regular business," the paper quoted a source as saying.

For the purpose of insider trading and front-running investigation, NPAs are treated as unpublished price sensitive information. A listed company has to disclose the information to the stock exchanges if it gets listed as a defaulter.

Sebi keeps a close watch of banking shares that see sharp price movements around the earnings announcements because of speculation on NPA numbers.

The Supreme Court in 2015 directed the RBI to disclose loan defaulters data to the CIC. The CIC has now raised the matter in a show cause notice to the RBI for failure to meet the court order. "If the CIC gets a positive verdict in the matter, the RBI will be forced to share the data with Sebi as well. If the case goes in favour of the RBI, Sebi will have to look for other supporting evidence," according to the source.

The situation is somewhat dicey for Sebi because Acharyalu, the information czar, is retiring on November 20, before the time granted to the RBI for replying. The CIC's view has been that the RBI governor should be treated as the central public information officer for the purpose of the RTI Act and he could not defy the Supreme Court.

The former bureaucrats sitting on the CIC, Manjula Prasher and Sudhir Bhargava, had taken sided with the RBI's position in the matter. Acharyulu overturned their position, ruling against the RBI.

Therefore, it would have to be seen how the CIC would rule in the case with a new information czar at the helm.