BJP Govt Pushed Electoral Bonds Despite RBI’s Opposition: Report

The Narendra Modi government had dismissed the Reserve bank of India’s (RBI) reservations on electoral bonds before unveiling the controversial instrument, a secretive way to channel money to political parties, it has been reported. 

According to a report by Huffpost India, in January 2017, when the Ministry of Finance wrote to the RBI asking its “early comments” on the electoral bonds, the central bank has recorded its unequivocal opposition stating that the electoral bonds would effectively be a type of “bearer bond”, a notoriously opaque financial instrument that carries no trace of its ownership.

The RBI on January 30, 2017, said that “electoral bonds and the amendment to the RBI Act would set a “bad precedent” by encouraging money laundering and undermining faith in Indian banknotes, and would erode a core principle of central banking legislation,” reveals the report. 

Furthermore, the bank added in its reply: “Bearer instruments have the potential to become currency and if issued in sizeable quantities can undermine faith in banknotes issued by RBI….The bonds are bearer bonds and are transferable by delivery. Hence who finally and actually contributes the bond to the political party will not be known.” 

As the report got published on Monday, opposition parties have criticised the BJP government alleging that the saffron party accumulated large funds through electoral bonds. 

PTI reported that the Congress alleged that electoral bonds became instruments of anonymous donations bordering on “opaque money laundering” and asked the Modi government to answer how many thousand crores were received by the ruling BJP through them.  

“RTI reveals how 'electoral bonds' became instruments of anonymous donations bordering on opaque 'money laundering',” Randeep Surjewala, Congress chief spokesperson said in a tweet.

On this matter, CPI(M) general secretary Sitaram Yechury tweeted: “BJP government defied RBI's warnings, as it charted a course to favour anonymous & unaccounted money. Electoral Bonds have ensured that BJP's coffers swell, legalising political corruption.This opaque instrument is ruining our economy & poisoning our democracy.”

In response to an RTI filed by Pune-based activist Vihar Durve, the State Bank of India has revealed that over Rs 822 crore worth of electoral bonds were sold in May 2019 alone, during the general elections. The Quint had earlier reported that a total of over Rs 4,794 crore worth of electoral bonds were sold in January, March, April and May of 2019. In 2018, over Rs 1,000 crore worth of electoral bonds were sold in the months of March, April, May, July, October and November in 2018.

According to Association of Democratic Reforms, electoral bonds worth at least Rs 6,000 crore have been sold since March 2018. 

The BJP has reported to the election commission that it had received 95% of the total electoral bonds sold in 2017-18 financial year. 

Furthermore, the report stated that the financial ministry has not even provided substantive arguments to counter the concerns raised by the RBI.

“RBI’s concerns were summarily and swiftly dismissed by Hasmukh Adhia, who was then revenue secretary, in a single short paragraph on the same day the finance ministry received the central bank’s letter,” according to the report. 

On February 1, 2017, then Finance Minister Arun Jaitley proposed the creation of electoral bonds, and the amendment to the RBI Act, as a means to introduce transparency and “cleanse the system of political funding in India”. In March 2017, the proposals passed into law with the passage of the Finance Bill 2017.

Citing documents obtained under the RTI Act, the report found that the early concept note on electoral bonds was unlike most memos prepared by the Indian bureaucracy. “It is undated, unsigned, and printed on a plain sheet of paper bearing no letterhead.”

The only suggestion that the finance ministry accepted from the RBI was “restricting the tenor of the Electoral Bearer Bonds to 15 days”.