The Congress on Monday claimed that electoral bonds had become instruments of anonymous political funding “bordering on opaque money laundering”. The Opposition party made the remark after a report in HuffPost India revealed that the Centre had ignored the Reserve Bank of India’s suggestion to not launch electoral bonds, which allow political parties to receive funds anonymously.

Tagging the HuffPost report on Twitter, Congress spokesperson Randeep Surjewala sought three answers from the Narendra Modi government. “How many thousand crores of bonds [were] issued?” he tweeted. “How many thousand crores received by BJP? The ‘Quid Pro Quo’?”

Another party spokesperson, Rajeev Gowda, said the government had dismissed the central bank’s reservations about electoral bonds in a perfunctory manner, PTI reported. At a press conference in Delhi, Gowda said: “It is a fraud on the people of India. It is a fraud on the electoral process. It eliminates the level playing field that needs to be there in a true democracy. It brings in opacity and this opacity was objected to by the Election Commission of India.”

He asked the Bharatiya Janata Party government to reveal the names of the entities that bought the bonds. “We demand that the BJP government explain to the people of India what policy favours, including the selling of public assets to crony capitalists, have taken place as a result of electoral bond transactions,” Gowda said.

RBI flagged drawbacks of scheme

HuffPost India claimed that four days before former Finance Minister Arun Jaitley proposed the electoral bond scheme in the February 2017 Budget, a tax official flagged that such a system would require amendments to the Reserve Bank of India Act. In a note on January 28, 2017, the official sent a draft of the proposed changes to senior officials in the finance ministry.

A finance ministry official then forwarded the draft, with the message “For early comments”, to then RBI Deputy Governor R Gandhi. The central bank responded the next working day, opposing the scheme. It said electoral bonds would set a “bad precedent” and could be used to launder money.

“Bearer instruments have the potential to become currency and if issued in sizeable quantities can undermine faith in banknotes issued by RBI,” the bank said in its reply, according to HuffPost India. The RBI reply was acquired by RTI activist Lokesh Batra.

The central bank’s reservations were reportedly dismissed by then revenue secretary Hasmukh Adhia, who claimed that the RBI had not “understood the proposed mechanism of having pre-paid instruments”. Adhia told the central bank that its advice had arrived late as Budget documents had already been printed.

In his 2017 Union Budget speech, Jaitley said the bonds would “greater transparency and accountability” in political funding.

In a detailed reply to RBI’s concerns soon after, the government claimed that Parliament was “supreme and has the right to legislate” on all matters of governance, including the RBI Act. In June 2017, the Centre formed guidelines on how the scheme would work.

The details of the electoral bonds were also kept beyond the ambit of the Right to Information Act, and parties were exempt from maintaining details of contributors. Even after discussions between the RBI governor and Jaitley later in July, the central bank flagged the scheme’s drawbacks the following month. BP Kanungo, then RBI deputy governor, noted “inherent scope of misuse of such bonds for undesirable activities”.

In an attempt to reduce scope for misuse of the bonds, the RBI said they should be valid only for 15 days since being issued. The central bank advised the government to limit releasing the bonds twice a year for a specific short duration, and only to entities with bank accounts that meet Know Your Customer norms. The RBI asked the government to release the bonds from its headquarters, and asked for a limit on the maximum aggregate value of the bonds issued in one year.

The Centre accepted the first suggestion but ignored most others. It also seemed to have sought advice from an anonymous external source.

Opposition criticism

Opposition leaders asked the government to respond why the suggestions of RBI were overruled to introduce electoral bonds.

Congress leader Priyanka Gandhi Vadra said national security concerns were dismissed by the government “to enable black money to enter the BJP coffers”. “It appears that while the BJP was elected on the promise of eradicating black money it was busy lining....its own pockets with exactly that! What a shameful betrayal of the Indian people,” Vadra said in a tweet.

Communist Party of India (Marxist) leader Sitaram Yechury said BJP “charted a course” to use anonymous and unaccounted money. “Electoral bonds have ensured that BJP’s coffers swell, legalising political corruption,” he tweeted. “This opaque instrument is ruining our economy and poisoning our democracy.”

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