The Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983

Summary of The Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983:
Key Components
1. Title and Enactment
• Act Name: Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983
• Act No.: 48 of 1983
• Enactment Date: 30th December, 1983
2. Definitions (Section 2)
• Public Financial Institution (PFI): Includes specific corporations (e.g., Industrial Credit and Investment Corporation of India Limited, Industrial Reconstruction Corporation of India Limited) and any other institution specified by the Central Government via notification.
3. Obligations (Section 3)
• Fidelity and Secrecy: PFIs must maintain confidentiality regarding their constituents' information, except in circumstances customary among bankers or as required by law.
• Exceptions for Information Sharing:
• With the Central Government.
• With the State Bank of India, its subsidiaries, corresponding new banks, other scheduled banks, or other PFIs for efficient discharge of functions.
4. Declaration of Fidelity and Secrecy (Section 4)
• Mandate: Every director, member of any committee, auditor, officer, or employee of a PFI must make a declaration before entering duties or within 30 days if already in position.

Legislative History:

The Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983

Act Title - The Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983

Act Number/Year - 48 of 1983

Act ID (India Code) - 198348

Presidential Assent Date - December 30, 1983

Enforcement Date - December 30, 1983

Nodal Ministry - Ministry of Finance

Precedent & Historical Rationale

1. Expansion and Protection of Institutional Confidentiality:

o During the early 1980s, India’s public financial institutions (such as ICICI, IRCI, and other designated term-lending bodies) managed expansive industrial portfolios, corporate financing data, and sensitive commercial records.

o While traditional commercial banks were bound by statutory obligations of fidelity and secrecy under their respective founding acts or banking regulations, several specialized public financial institutions lacked explicit, uniform statutory mandates protecting customer and corporate confidentiality.

2. Standardizing Professional Secrecy and Declarations:

o The legislative intent centered on imposing a formal, statutory duty of fidelity and secrecy upon directors, committee members, auditors, officers, and employees of public financial institutions.

o It also required these officials to make formal declarations of fidelity and secrecy, ensuring that sensitive financial and credit information of constituents was protected from unauthorized disclosure while permitting necessary information-sharing between regulatory bodies and scheduled banks.

Parliamentary Trajectory & Enactment

• Formulation: Drafted by the Ministry of Finance to plug gaps in institutional governance and secrecy standards across public financial lending companies.

• Parliamentary Passage: Introduced, debated, and passed by both Houses of Parliament (Lok Sabha and Rajya Sabha) during the winter session of 1983.

• Presidential Assent: Received Presidential Assent on December 30, 1983.

• Enforcement: Enforced on December 30, 1983.

Source: Official Records of Parliament, India Code, and Ministry of Finance (Department of Financial Services).