How Modi govt dismissed RBI warnings
| | When former finance minister Arun Jaitley announced the introduction of electoral bonds—an instrument to channel anonymous funds to political parties—in Parliament in 2017, he claimed it was being done to make the system of political funding more transparent. We know how that turned out—at least Rs 6,000 worth of bonds have been sold since March 2018, and we have no idea which political party has received how much (though the BJP did get 95% of the Rs 222 crore from the first tranche).
Now it gets better. On Monday, HuffPost India published the first in a five-part investigative series called #PaisaPolitics, by journalist Nitin Sethi, that looks at what happened behind the scenes as the Modi government worked to bring untraceable funds to Indian politics. The series is based on a tranche of documents obtained by transparency activist Commodore Lokesh Batra (Retd) under the RTI Act.
The first story reveals that just a few days before announcing the scheme, the government reached out to RBI for its opinion. When the central bank strongly advised against the move, saying it would set a “bad precedent” by encouraging money laundering and undermining faith in Indian banknotes, the government just dismissed the warning and went ahead anyway. |
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| | | So what really happened?
The documents reveal that four days before Jaitley was scheduled to make his budget speech in Parliament, finance ministry officials realised that the electoral bond scheme would require an amendment in the RBI Act. The same day, a perfunctory email was sent to the RBI, asking for “early comments”. 2 days later, the RBI sent its reply, warning the government of the pitfalls of the scheme.
In a few hours, the then revenue secretary had dismissed the objections, and was swiftly backed by the secretary of economic affairs and FM Jaitley himself.
The best part? Though the finance ministry itself had only contacted the RBI four days before the budget, revenue secretary Hasmukh Adhia concluded his letter by saying that they could go ahead because the RBI’s advice had come quite late, after the finance bill had already been printed.
What else?
In its more detailed rebuttal to the RBI, which was done after the controversial Finance Bill was passed, the government overruled most of the central bank’s concerns. Sometimes, the answers were just blunt. Sample this: when RBI warned that the bonds would seriously undermine a core principle of central banking and set a bad precedent, the finance ministry said, “Parliament is supreme and has the right to legislate on all subjects of governance including the RBI Act.”
The documents also show that most of the subsequent concerns raised by the central bank were also dismissed.
And if that isn’t interesting enough, Sethi also discovered an anonymous note, which appears to be an early concept note on electoral bonds. This early note is unlike most memos prepared by the Indian bureaucracy: it is undated, unsigned, and printed on a plain sheet of paper bearing no letterhead. A retired bureaucrat who reviewed the note for HuffPost India said the note “reads more like it was written outside the government and given to the government as a concept note”. Eventually, the government discarded this mysterious note.
What next?
Look out for Part Two of #PaisaPolitics on https://www.huffingtonpost.in/ tomorrow! |
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