The finance ministry shot off a last-minute note seeking the Reserve Bank of India (RBI)'s opinion on electoral bonds, only to completely dismiss it ahead of the 2017 budget presentation. According to a revealing report by HuffPost India, despite serious reservations from the RBI, there was an undue haste shown by the government in introducing the concept of electoral bonds in the Union budget of 2017, presented by the then Finance Minister Arun Jaitley.
Introducing electoral bonds would mean that the Reserve Bank of India Act had to be amended, for which the government required RBI's support. Consequently, the finance ministry sent a five-line email four days before the budget presentation in 2017 to Rama Subramaniam Gandhi, then a deputy governor of the RBI and second-in-command to Urjit Patel, "requesting early comments" from the central bank. RBI's prompt reply came on the next working day—Monday—expressing its strong objections to the proposed bonds. The RBI 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.
In ordinary cases, such strong words of objections from the RBI would have led to the administration taking note and proceeding only after further consultations. However, that was not the case to be with regard to electoral bonds.
RBI’s concerns were reportedly swiftly dismissed by then revenue secretary Hasmukh Adhia on the same day the finance ministry received the central bank’s reply. Adhia, in his response, noted that RBI had a lack of understanding on the idea of electoral bonds and pinned the blame on the central bank for advising too late. "On the same day, economic affairs secretary Tapan Ray agreed with Adhia. The file moved with lightning speed, and finance minister Jaitley signed off on it immediately," reports HuffPost India.
Two days later, Jaitley introduced electoral bonds during his budget presentation and the same was passed into law as the Finance Bill 2017, bypassing the RBI.
In addition, the report reveals that the central government also ignored most of the subsequent suggestions on electoral bonds from the RBI.
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The scathing revelation comes amid reports that of the first tranche of electoral bonds worth Rs 222 crore, 95 per cent went to the BJP, according to data compiled by the Association for Democratic Reforms. Further, a total of Rs 6,000-crore worth of electoral bonds were sold since March 2018.
The electoral bonds, introduced by the government for curbing money laundering and promoting transparency among political parties, on the contrary, have been criticised for its opaqueness. These bonds allow corporations or individuals to purchase bonds equivalent to the sum that they wish to donate to political parties of their choice in an anonymous manner. Political parties are allotted a verified account by the Election Commission and all the electoral bond transactions are done through this account only. The electoral accounts are issued by the State Bank of India. The bonds can be purchased in the months of January, April, July and October.
The bonds remain valid for 15 days and can be encashed by an eligible political party only through a bank account with the authorised bank within that period only. The 15-day limit was the only RBI suggestion that finally went into the rule book for issuing electoral bonds.
While every donor has to provide his/her KYC detail to the banks to purchase the electoral bonds, the names of the donors are kept confidential. The enforcement agencies can access their names, which means that only the government would know exactly who had bought these bonds.
