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FM Sitharaman says RBI had no objection to electoral bonds issuance by SBI; documents point otherwise

It is unclear why the government initially assured the RBI that RBI "alone" will issue electoral bonds as it could not do so under Section 31(3) of RBI Act.

Written by Udit Misra | New Delhi | Updated: December 11, 2019 4:31:01 am
Nirmala Sitharaman, Nirmala Sitharaman on electoral bonds, SBI electoral bonds, RBI,  electoral bonds, indian express Finance Minister Nirmala Sitharaman. (PTI File photo/Vijay Verma)

On Tuesday, replying to a question in Rajya Sabha raised by DMK’s Tiruchi Siva about what the Reserve Bank’s “indirect” approval to the issuance of electoral bonds meant, Finance Minister Nirmala Sitharaman said: “RBI, being a stakeholder, was involved in the consultation process and during the consultation process, they had certain questions to ask about the particular platform of issuance as to who is going to issue it and also the proforma with which it is going to be issued. These consultations were recorded, but, at the end of it, as long as the bonds were going to be issued by the State Bank of India, they did not have an objection. So, when said ‘indirectly’, it meant, subject to that”.

However, documents accessed through RTI by transparency activist Anjali Bharadwaj, show that — far from being just “involved in the consultation process” — the government had for the longest time assured the RBI that the central bank “alone” would issue the bonds. However, the RBI could not issue electoral bonds. This was because of the amendment to the RBI Act, which added a new Section 31(3), in February 2017, which allowed the government to authorise only “scheduled banks” to issue electoral bonds.

But RBI is not a scheduled bank and could not legally issue bonds under Section 31 (3). As early as August 5, Prashant Goyal, (the then joint secretary, DEA) had noted this fact. In reply, SC Garg, the then Secretary, DEA, agreed that for RBI to issue electoral bonds “might be legally difficult”. Yet, in repeated letters (on September 21 and 29 later that year) Garg assured Patel writing “I, with approval of the Finance Minister, convey … (that) RBI’s suggestion on issuance of Electoral Bonds by RBI alone…had been accepted by Government earlier”. These letters downplayed the “inclusion of any Scheduled Bank in the draft scheme”, claiming that such inclusion “is intended only as an enabling provision”.

It is unclear why the government initially assured the RBI that the central bank “alone” will issue electoral bonds when the government knew all along that RBI could not issue such bonds under the newly added Section 31(3) of the RBI Act.

The significance of issuing electoral bonds under Section 31(3) is that the donors get the benefit of anonymity only under this Section.

Emailed queries to both the RBI and Garg went unanswered.

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