In an email, RBI Chief General Manager Alpana Killawala explained that “it is not a question of banks ‘opposing’ (Natgrid) to share customer details. They are not allowed to under the existing law.”
Natgrid, partially approved by the Cabinet Committee on Security early last month, proposes to link several databases, including bank accounts, railways, airlines, stock exchanges, income tax, credit card, immigration records and telecom service providers. Experts say, Natgrid would allow security agencies to monitor a targeted individual across these databases in real time.
To track terror money, Natgrid also reportedly seeks to access individuals’ savings accounts through district magistrates.
Information sourced through RTI by Venkatesh Nayak of Commonwealth Human Rights Initiative (CHRI), reveals that RBI held two meetings on the subject late last year. On October 1, 2010, four Natgrid officials led by CEO Raghu Raman, made a presentation to a high-powered audience comprising of top officials from the RBI and several banks at Mumbai.
On December 22, 2010, at another meeting with senior bank officials, the RBI conveyed a ‘request from Government of India’ to provide customer information to Natgrid. However, banks collectively declined to share information citing ‘customer confidentiality clause’ and ‘possibility of fraud’.
SBI Chairman Pratip Chaudhuri said banks were reluctant to share information with Natgrid as they were under obligation to protect customer confidentiality. “If the data becomes public, customers with large deposits could become vulnerable to extortion or kidnapping,” he said.
Chaudhuri also pointed out that with the linking of Pan cards with banks, a mechanism was already in place to alert Income Tax authorities on large and unusual transactions.
Banking law consultant P R Kulkarni said banks were bound to maintain confidentiality by the contract they sign with customers. The secrecy condition has evolved through customs and received some recognition in the Banking Companies Act of 1970.
“If banks divulge information to third parties, customers can sue them for damages,” he said.
However, banks are also legally required to share information with different government agencies. The Parliament has passed several laws such as Income Tax act, FERA and Companies Act requiring banks to share customer information with designated government authorities.
So, if a new agency such as Natgrid is set up it would have to wait for the Parliament to pass the law before seeking information. During the December meeting with RBI, banks said they would share information with Natgrid if a ‘specific legislation’ was passed.
Experts say Natgrid can also take another route by persuading the RBI to pass a directive for the banks to share information. However, this option also seems to be blocked, given the position taken by the central bank on the subject.
Nayak of CHRI said Natgrid had been set up with just an executive fiat and did not carry the authority of any law. “It cannot compel the banks to share sensitive information,” he added.
“Natgrid’s attempt represents a trend of intelligence agencies trying to work outside the purview of Parliament or any independent oversight,” he said.
However, a top official of the Union Home Ministry told Deccan Herald that as Natgrid was sponsored by the government, it did not need any further legal backing. “Privacy laws of the land would be respected, but law themselves change with time in line with changing concept of security,” he added.
Playing down the banks’ resistance, he said, “We are not dealing with banks but with the ministries here,” obviously referring to the finance ministry. However, escalating the issue to higher authorities may not be a cake walk, given the lack of trust between the finance and the home ministries.
Last week, Prime Minister Manmohan Singh confirmed that Finance Minister Pranab Mukherjee had complained to him directly, bypassing Home Minister R Chidambaram, about the suspected bugging in finance Ministry.
Making life more difficult for Natgrid, Mukherjee had reportedly opposed sharing of customer details in September 2010, noting that it would intrude into privacy of the bank depositors and discredit the banking system.
Despite his reservation, Natgrid officials went ahead with their October 2010 presentation at RBI. But with the banks coming out strongly against Natgrid, the ball seems to be heading back to Mukherjee’s court.
(With inputs from Deepak Upreti in New Delhi and Dilip Maitra in Bangalore)
