Rights groups slam RBI for stand on class action suits
Consumer rights activists have strongly criticised the Reserve Bank of India's (RBI's) suggestion that banks be excluded from the purview of "class action suits" in the new Companies Bill. HT reports.Updated: Sep 06, 2010 22:58 IST
Consumer rights activists have strongly criticised the Reserve Bank of India's (RBI's) suggestion that banks be excluded from the purview of "class action suits" in the new Companies Bill.
Companies Bill 2009, which was introduced in Parliament last year, has proposed to empower shareholders' associations or groups of shareholders to take legal action in case of any fraud by a company, through class action suits.
A class action is a form of lawsuit where a large group of people collectively bring a claim to court, and is a deterrent for frauds.
In its note to the Standing Committee of Parliament that examined the Bill, the RBI said the banking sector has well-defined grievance redressal machinery such as the ombudsman, and should be kept out of the ambit of class action suits. The corporate affairs ministry, which is piloting the Bill, has agreed to vet RBI's suggestion.
Consumer activists said any move to dilute the proposals for class action suits would harm ordinary people.
"The RBI should stick to the regulatory aspects of the banking industry," said Bejon Mishra, chairman of consumer rights group VOICE. "RBI is being biased and insensitive to consumer issues. Banks should be made more accountable and responsible."
The thinking of the House Panel, headed by former finance minister Yashwant Sinha, is in line with the Reserve Bank.
Industry chambers termed class action suits as a progressive, but batted for adequate safeguard measures.
"While this is a progressive step, it does raise the risk of frivolous litigation and strike–suits against companies. Safeguards be put in place," Confederation of Indian Industry told the Panel.