Page 39 - Banking Finance April 2020

ARTICLE

From 2014-15 to 31st December, 2017, Rs. 272558 crores provide lion share of political funding via electoral trusts just
of corporate loans have been written off by PSBs, which is to remain apolitical. As per Rights to Information Act (RTI
more than double the loan written off from 2007-08 to 2013- Act) political parties are required to disclose donations
14, Rs.121650 crores. The total loan written off in 2017-18 received above Rs.20000 or more to the Election
as the ICRA report published in The Indian Express article is Commission and Income Tax Authorities.
Rs.144093 crores. The stark contrast in writing off loans
during the two periods indicates that from 2007-08 to 2013- Hence a large part of donations remain undisclosed. Even
14 the problem of bad loans was infectious but from 2014- though these disclosures forms tip of the iceberg of political
15 it has become acute and epidemic. So writing off in a donations but still has enough venom to stir the minds of
rampant manner was adopted to hide the reality. readers. ADR or Association of Democratic Reforms (a NGO
formed by a group of Professors from IIM, Ahemadabad)
Proposed FRDI Bill, 2017 studied the political donations received by big national
political parties and published a report on 30th May, 2018.
To deal with the above menace in the banking sector The
The following table indicates the amount of donations above
Financial Resolution and Deposit Insurance Bill, 2017 was
Rs.20000 received by political parties in the year 2016-17.
proposed to be passed in the winter session of the
Parliament in 2017 but withdrawn by Government on 19th
July, 2018 amid severe backlash from all corners of the Table VI: Number and amount of donation
country due to its controversial 'bail-in' clause. The 'bail-in' (above Rs.20000) declared by National Parties
clause means the bank deposits which are bank liabilities will for the Financial Year 2016-17
stand to be cancelled if banks enter into deep financial
National Parties Number of Amount
trouble. Passing of this bill will lead to paradigm shift in the
meaning of survival of banks, from safety of depositors' Donations (Rs. in crores)
money to restoration of capital of banks. BJP 1194 532.27
INC 599 41.9
Moreover, failing banks will be recovered through NCP 22 6.34
depositors' money rather than bailing out by Government. CPM 200 5.25
Thus the proposed FRDI Bill can be used as an instrument
AITC 12 2.15
for maintaining capital adequacy of banks during distressed
times of public sector banks as of now caused due to CPI 96 1.44
snowballing NPAs in corporate sector. This in turn will Source: ADR Report, 30th May 2018
provide an open window for bad corporate to willfully default
in their loans and reducing their accountability for misusing The total donations (donations above Rs.20000) received by
of public fund. Further the common man will have to bear national parties in the year 2016-17 is Rs.589.38 crores
the burden of such default as it is the common mans' money
which will get wiped off if bank defaults under the proposed
new regime.

Political funding by Corporate Houses
Giving of favors to corporate by successive Governments
knowingly or unknowingly lies in the fact that huge chunk
of funding of the political parties comes from the corporate
houses. Nowadays in every big election of the country, huge
crores are spent by political parties during the campaign to
show the strength and power of the parties and their
leaders. Corporate houses with a view to run their business
in a smooth manner and to have a stable Government

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