The Reserve Bank of India (RBI) had opposed the controversial electoral bonds just two days before the then Finance Minister Arun Jaitley's Budget speech in 2017, according to a report by Newslaundry.
Electoral bonds are promissory notes 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. These bonds are issued in multiples of Rs 1000, 10,000, 1 lakh, 10 lakh and 1 crore.
According to the report, four days before the 2017 Budget was presented, on January 28, a senior tax official noticed a flaw in the document on electoral bonds that was to be presented by the then Finance Minister Jaitley in Parliament. The official warned his senior officials in the Finance Ministry by writing an official note that read: "To make anonymous donations legally valid, the Reserve Bank of India Act needs to be amended."
A draft of this was also sent to the top officials of the Finance Ministry for approval. The same day, a Finance Ministry official responded on the proposed amendment to the then Reserve Bank Deputy Governor Rama Subramaniam Gandhi, who was the second-most senior official after Urjit Patel, the then Governor of the Reserve Bank.
Two days later on January 30, 2017, the RBI sent another mail saying that "amending the Electoral Bonds and the RBI Act will start a wrong tradition. This will give an impetus to money laundering, break the trust in Indian currency, and as a result, the basic principles of central banking law will be threatened."
"This step will enable many non-sovereign entities to issue bearer instruments. Any such arrangement is against the idea of issuing the holder documents ie cash by the sole RBI. The holder documents the currency. Can be an option of, and if they start being issued in large amounts, then you can reduce the trust with currency notes issued by RBI. Any amendment to Section 31 of the RBI can seriously damage the fundamental principle of central banking law and will set a wrong tradition," RBI further stated, according to the NewsLaundry report.
According to statistics provided by Association for Democratic Reforms (ADR), electoral bonds worth Rs 6,128 crore were sold between March 2018 and October 2019 with majority of them happening in March-May this year when the country was in Lok Sabha election mode. Of the total electoral bonds sold in 12 editions during this 18 month period, political parties have redeemed bonds worth at least Rs 5,876 crore, excluding October as data for the month is not available.