Electoral Bonds | SBI might win the battle, but lose the war on banking autonomy

Ironically, the Narendra Modi government which claims to have cleaned the banking system created a set of transactions which has muddled the banking system.

The State Bank of India (SBI) has requested the Supreme Court of India to extend the time for submission of details regarding electoral bonds to the Election Commission of India (ECI) from March 6 to June 30. While this development is on expected lines, it is still a chilling tale of how governments can compromise monetary and financial systems to achieve political goals. 

In an earlier article, it was observed how the government issued electoral bonds despite objections from the Reserve Bank of India (RBI). The government had initially proposed that all scheduled commercial banks issue electoral bonds. The RBI said that this would question the credibility of the financial system, and only the RBI Mumbai office should issue the bonds. The government ignored the RBI’s concern and made the minor modification that the SBI would be the sole bank to issue electoral bonds. The SBI notified 29 branches across India to issue the bonds.

Requesting an extension, the SBI has said that since there were 22,217 electoral bonds were issued between April 12, 2019 and February 15, 2024, and since the information was in two silos, the bank had to decode 44,434 information sets.

This is a juvenile, half-hearted attempt at an excuse, and is a rebuke of the court’s order. In this age of technology, this information should already be available with the SBI. Even if it is not, given the importance of the data, the bank should work doubly hard and provide the information before the Lok Sabha polls. The information must be out before the polls because as observed by the court, the people have the right to know what are the sources of income for the political parties.

Even after the Supreme Court judgment, there were discussions on how the government would try and delay the release of the data, for obvious reasons. Some suggested that the government might bring an ordinance to block the judgment, whereas others opined that the SBI would likely seek an extension from the court.

The government did not bring an ordinance to block the release of the data, but the SBI has sought for an extension. Even if it is all on expected lines, it is shocking to note the brazenness with which the government has compromised India’s monetary and banking system. The government first put the SBI under pressure to issue electoral bonds, and is now seemingly using it to delay the release of court-mandated information.

It is also interesting to note how the relation between banks and political funding has changed. Until now, the governments have been accused of using nationalised banks to give loans to entities and then these entities give funding to political parties. It was an indirect way of channelising funds to political parties. This time around, it is all direct. The SBI is merely acted as an intermediary where the entities transferred funds to their preferred political party. While the objective of bonds was to increase transparency, it created more opacity, and unnecessarily dragged the SBI into this controversy. It is ironic that the government which claims to have cleaned the banking system created a set of transactions which has muddled the banking system.

In the earlier mentioned article, it was argued that the RBI lost the battle in preventing the issuance of electoral bonds, but it won the war by speaking up against the bonds. In SBI’s case, it might win the battle by not releasing the data before polls, but looming is the threat of it losing the war of keeping banking away from political funding — and even worse undermining trust in the banking system.

History of banking is replete with examples of how combining politics and banking undermines the trust in the banking system.

(Amol Agrawal is an economist teaching at Ahmedabad University.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.