EC vs RBI PDF Print E-mail
Tuesday, 31 January 2017 03:57
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Ishaan's edit


How can politicians have differentt cash-drawal limits?


With the central bank removing all restrictions on cash withdrawals on current accounts, this resolves the stand-off between RBI and the Election Commission (EC). While EC wanted RBI to considerably reduce restrictions on cash withdrawals so that candidates could spend freely in the forthcoming assembly elections, its refusal to do so earned the EC’s ire and, according to a report in The Times of India, while saying “it appears that the RBI had not realized the gravity of the matter”, EC threatened to use its “absolute powers” to direct RBI in the interests of conducting free and fair elections. Since politicians and political parties can open current accounts, the expenditure restrictions are not an issue any more.

That said, the issue boils down to whether there should be different rules for individuals/businesses and politicians. After all, if citizens are subjected to limits for cash withdrawals and be forced to make payments through bank transfers or by debit/credit cards, why should the rules be different for politicians? Matters are even tougher for businesses since they have to pay workers and suppliers, but RBI had cash-withdrawal limits for them as well—surely running a business should be considered at least as important as fighting an election? More important, while it is true the EC has got political support in putting limits on election spending over the years, thanks to exemptions for spending by political parties and a candidate’s friends, the current spending limits are only observed in the breach—ditto for the rules on disclosure of political donors thanks to the R20,000 exemption for cash-donations. Since no political party seems to be in a hurry to clean up political funding and expenditure, surely the EC should be using its extraordinary powers here?

What is especially odd about EC’s letter to RBI is that its own ‘compendium of instructions on election expenditure monitoring’ issued on September 26, 2016, is quite clear that expenditure over Rs 20,000 should be made by cheque. If the amount payable, to quote the instructions, “by the candidate(s) to any person/entity, for any item of expenditure, does not exceed Rs 20,000/- during the entire process of election, then such expenditure can be incurred in cash … All other payments are to be made by Account payee cheque from the said bank account”. It can be argued the EC directive applies to each individual payment—so, for instance, there can be five different payments of R19,999 for five rallies every day to 30 different mike suppliers for a whole month of campaigning, but the overall sense is EC too wants a restriction on cash payments since they make expenditure monitoring difficult. In which case, the EC asking for cash limits to be raised to R2 lakh a week is difficult to understand.


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