Amid cash haul recovery from Dhiraj Sahu, ex-RBI Governor Raghuram Rajan seeks more transparency on electoral bonds

Former RBI Governor Raghuram Rajan and a critic of the Narendra Modi-led government at the Centre said that electoral bonds are a bad way of financing elections as the only people who know who donated what are the State Bank of India (SBI).  

"Electoral bonds are non-transparent ways of financing parties. Who gave the money and what did they get against it, nobody knows about it. So how can it be a transparent form of financing. If an industrialist gives a Rs 1,000 crore to the party, we will never know who gave it."

In an interview published by The Red Mike, Rajan said: "It is worse than cash as the only people who know about who donated are the State Bank of India (SBI). Now, how much is kept secret in such cases is a matter of concern. How much does the government know who donated where. All this make these bonds an unequal form of donation because the govenment can always call up the people who donated their money to the Opposition. That is my worry. It doesn't mean it is happening now."

He added in such situations the Opposition parties are “forced” to use illicit money because electoral bonds provide an unequal playing field favouring the ruling party.

Referring to unaccounted cash recovered from Congress Rajya Sabha MP from Jharkhan Dhiraj Prasad Sahu, Rajan said: "Like recently so much money was recovered from the MLA. Elections are fought with money. These guys can write checks, while the others have to take the bundles of cash. You are creating an unequal playing field because you are forcing the cash to come here and checks there (to the ruling party). And then you put ED and CBI to nab those people. This is not a fair election process."

Electoral bonds, which were introduced in 2018, are interest-free bearer bonds or money instruments that can be purchased by companies and individuals in India from authorised branches of the State Bank of India (SBI).

These are available in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. The donors can purchase these binds through a KYC-compliant account to make donations to a political party. The political parties have to encash them within a stipulated time.

Before electoral bonds, the Electoral Trusts (ET) Scheme was in place, which was introduced by the UPA government in 2013.

While the Electoral Bond scheme seeks to ensure anonymity for the donor, the electoral trusts under the previous scheme were required to submit to the Election Commission of India a report on contributions from individuals and companies, and their donations to parties every year.

In November, the Supreme Court observed that the electoral bond scheme of political funding suffers from “serious deficiencies”. The apex court added that the Union government ought to consider designing a new tailor-made system that balances proportionality and paves the way for a level playing field instead of “putting a premium on opacity”.

Recently, the Income Tax Department recovered Rs 351 crore during raids at the premises of Congress MP Dheeraj Sahu. The income tax department raided the premises on Wednesday and found stacks of notes kept in almirah racks. The counting could not be completed during the weekdays due to normal working hours. It was completed during the weekend.

The I-T raids were at the premises of Boudh Distilleries Private Limited across Odisha, Jharkhand and West Bengal. The Congress said the party has no involvement in the MP's business and he should explain this huge amount of cash.

Rajan, who is the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago Booth School of Business, is in India to release his new book, Breaking the Mould. The new book, which Rajan co-authored with economist Rohit Lamba, is about their vision of the Indian economy.

Rajan said he is taking a critical stance on India’s current growth trajectory even when the stock market is booming and equity investments are paying off as the buoyancy is due to global factors like fading fears of recession and diversion of EM flows from China to India.

As per NSDL data, India is in an advantageous position as foreign investors have poured around $16 billion into Indian stocks so far in the calendar year 2023. On the other hand, China's new foreign investment reached the lowest level in 25 years in the second quarter.

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