Money scheme: RBI vs ECI

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Some recent revelations about electoral bonds have confirmed many apprehensions and concerns over the scheme expressed at the time of its introduction in 2017 and since then. The central government had on January 29, 2018, notified the electoral bond scheme. It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen can then donate the same to any eligible political party of his/her choice. It now transpires that the Reserve Bank of India (RBI) and the Election Commission of India (ECI) had serious reservations about the scheme. The then RBI governor had told the government that allowing any entity other than the RBI to issue bearer bonds which can be used as currency is risky. It also said that it would set a wrong precedent. The Election Commission warned that the scheme would enable foreign companies and big Indian corporates to route money, including illegal funds, to political parties without revealing their identity. The government brushed aside these objections and smuggled in the scheme as part of the Finance Bill of 2017, ensuring that the Rajya Sabha did not vote it down. Information obtained under the RTI Act has shown that the government has violated RBI regulations on the buying period and expiry dates of bonds to favour the BJP. Rules were allegedly changed before the Assembly elections in Karnataka to collect funds by providing special windows for the issue of bonds and to encash them, and even the PMO had a role in these violations. It has also been charged that corporates have laundered black money through the bonds. The disclosures have falsified the government’s claim that the scheme makes political funding clean and transparent. It actually lacks transparency because the donor’s identity is kept secret.

Opponents to the scheme allege that since the identity of the donor of electoral bonds has been kept anonymous, it could lead to an influx of black money. Others allege that the scheme was designed to help big corporate houses donate money without their identity being revealed. The government is in a position to know the identity of the donors because it controls the SBI, which issues the bonds. The information can be used to harass those who donate to opposition parties. The earlier limits on donations have been removed and any entity can donate any amount. Contributions in hard currency are still possible and so there is no check on black money.

It is now known that the government ignored the views of the RBI and the Election Commission in the design of the scheme and bent rules in its working. It has turned out to be a scheme to benefit the ruling party and to starve other parties of funds.  This is clear from the fact that the BJP got 95 percent of the Rs 222 crore bonds issued in the first tranche. Big donations of Rs 1 crore and more accounted for 91percent of the total Rs 5,896 crore collected under the scheme. It has made the system of political funding opaque and poses a threat to democracy.

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