Money & Banking
RBI imposes Rs5.6 lakh fine on SBI for violating currency chest norms

SBI is fined for deficiencies and lapses in the operation and maintenance of the currency chest at its Secunderabad branch

The Reserve Bank of India (RBI) on Wednesday said it imposed a fine of about Rs5.6 lakh on State Bank of India (SBI), the country’s largest lender, for violation of currency chest norms.


In a statement, the central bank said, "The Reserve Bank has imposed a penalty of Rs5.63 lakh on 12 July 2013 on SBI for violation of the terms of agreement with RBI for opening and maintaining currency chests".


The penalty was levied in connection with deficiencies and lapses in the operation and maintenance of the currency chest at the Secunderabad branch of the state-run lender, it said.


Last month, RBI had imposed a penalty of Rs3 crore on SBI for violating know your customer (KYC) and anti-money laundering norms.


The penal action by RBI was taken after Cobrapost alleged violation of KYC norms and money laundering by banks and financial institutions.


"After considering the facts of each case...Reserve Bank came to conclusion that some of the violations were substantiated and warranted imposition of monetary penalty...," RBI had said at that time.


Cobrapost had alleged that the financial sector entities had offered to open bank accounts and lockers for customers without following KYC norms, convert their black money into white and obtain fictitious PAN cards.


Those named in the expose include SBI, LIC, Punjab National Bank, Bank of Baroda, Canara Bank, Reliance Life, Tata AIA, Yes Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, Dhanlaxmi Bank, Federal Bank, DCB Bank and Birla Sun Life.


Why traditional Indian investor is not interested in equities and other products

Five business news channels, so many newspapers, magazines and websites would not be able motivate traditional Indian investor to invest in equity and other variable return products unless the investment climate in the country is not changed significantly

He is not worried about his investments beating inflation. He abhors equity and believes it to be a gamble. Mutual funds are a strict no-no for him. He believes that investments in physical assets are as important as financial assets. He chases bank deposits and believes that insurance in an investment and not just a risk covering instruments. Media’s attempt to change his mind set towards investments has hardly worked. He continues to be the same over generations. There are no prizes for guessing it right. Welcome to the world of the traditional Indian investor, the investor who has existed for ages and has been successful as well. He has contributed significantly to the economic growth by generating one of the highest savings in the world. The recent events in the financial markets have brought focus back to this kind of investor. The turmoil in the market has shifted focus back to the strategy of this investor.

Before moving ahead let us look at traditional Indian investor and his investments. Investors generally make investments in two kinds of assets- financial assets and physical assets. Financial assets are bank deposits, insurance and equity while physical assets are gold, real estate and some white goods used on a day-to-day basis. As per the data released by the Reserve Bank of India (RBI), investors in the country invested in financial assets as follows over years:

From this, it can be safely concluded that the majority of Indian investors are extremely conventional in approach and have no out of the box thinking. The investor has stuck to the same investments over a period of time. It is very obvious that bank deposits and insurance have been the most preferred investment option for the traditional investors. Shares and debentures are hardly preferred by the investors. The highest savings in shares has been around 7% which has fallen substantially now. The RBI data related to projection of savings  during 12th five year plan gives a bigger picture of how savings are going to be in financial and physical assets over a period of five years ( Refer: table below). It is clearly evident that bank deposits will continue to be as high as 50% of total savings. The share of insurance in total savings is also going to remain strong while that of shares and debentures will once again be consistently low.

What is the DNA of traditional Indian Investor?

Looking at the data and the nature of the financial savings made in India, the obvious question that comes to mind is why do Indian investors invest in traditional financial assets or to be more precise, ‘sarkari’ kind of assets? Why is bank deposit more important for this investor than investments in shares? Is the investor worried about volatility and is completely risk averse? The answers are both yes and no. Majority of Indian investors struggle to save because of low-income levels and hence do not want to risk their hard earned money, so they invest in traditional investment assets. It is not about financial education. In India five business news channels, so many newspapers and magazines and websites keep on bombarding investors with need for investment in equities for consistent wealth creation but this has somehow not worked. Therefore, this category of investors is fairly aware about investment options. The traditional Indian investor in keen on preserving his wealth as the ability to take risk is limited.

There is another group of investors, which is affluent and can take risk, but has learnt over a period of time that investment in variable investment products can be rewarding but also killing many times. This investor has been investing in the equity market but gradually, he seems to be disillusioned. The bitter experience over a period has made this investor realize that it is better to keep away from equity. The proof of the pudding is in the eating and you cannot convince an investor to invest for long term, if the returns are not good.

The traditional Indian investor is a very intelligent breed and knows his interest very well. The famous saying that ‘a bird in hand is worth two in the bush’ drives him. Is he doing harm to himself by not investing in equity and other variable return products? The answer is no, as long as he is meeting his financial goals. In the current market turmoil, he is sitting pretty and is not worried about what next.

Is the traditional Indian investor good for Indian economy? 

While some may argue that the traditional Indian investor is doing harm to himself, by not investing in risky, but potentially rewarding products, the fact remains that he is a boon to the Indian economy. He is a cheap source of capital and helps the economy channelize necessary savings for future investments. The deposits made by him help utilize the resources for investments in the economy. Debt is a comparatively cheaper source of capital compared to equity, and investors in India have contributed to this in a significant way, by making investments in debt products. The physical savings made by these investors sometimes become unproductive and needs to get channelized for more productive usage.

Is the investment profile going to undergo changes in India in the days to come? It is difficult to answer this but the fact remains that investors cannot be motivated to invest in equity and other variable return products as long as the investment climate is not changed significantly. Volatility is a part of equity investment but manipulation needs to be controlled. Better corporate governance and confidence building measures can bring more investors into the fold. But it looks difficult in the near term. The ‘Traditional Indian investor’ is here to stay.




4 years ago

Iam a financial advisor, people tend to ask for good return on their investment, I used to tell that if they want to invest for not less than five years, I suggested them mutual funds investing in equities. Now mutual funds gives negative returns, if they had invested before five years.So,they have to invest only in FDs only for better capital return.


4 years ago

The author is just another aam admi trying to prove he is not.
Let me put some factual arguments why stock market does not find any takers in India

1) Corporate Governance and Lack of faith in companies:
Most of the 7000 stocks trading in India do not have proper accounting practice and they bump up some of the numbers.

2)Dearth of quality:

Nearly all the companies offer commodotised products and services which can be easily replicated. Investors need to approach Bottom-top thematic approach.

3) Manipulation and speculations:

It is no secret that practices like circular trading and black money of 1 trillion dollar are making their way onto trading. Gullible investors lose their money and prefer FD ,real estate and Gold

4) Aam Admi never made any money in stock market as the market made strides from 4000 to 21000 just in 4 years of 2003-07. Rest of the period , stock market absolutely gave no returns for long investors in NIFTY.

5) Most of the money made in market in India requies use of derivative and intra day/short term technical charts which are used by few specialised traders and common people cannot do it

6) Mutual funds do offer real potential to common people but they are very selective and requires again lot of due deligence

Panna Thakkar

4 years ago

To make the Tradational Investor to even think or dream of to come to the equity cult. The Govt, Stock brokers etc should work hard to be transparent.
There is curroption everywhere there is cheating everywhere stocks lying in demat a/cs are used by brokers.
Why then the tradational investor ever think beyond this safe comfort zone?


Gautam Haldipur

In Reply to Panna Thakkar 4 years ago

If as you say there is cheating in totality, the system ought to have collapsed long ago. The fact is it has not & the reason being it is vibrant, dynamic & reasonably strong. If you check your Demat A/c regularly & your Instruction stationery is with you, then you can opt to sue your DP & seek fair compensation. It is possible that it cud have happened, but the thought is honestly far fetched.

I am glad to see you ask why beyond the Comfort Zone? Here is the answer:
Comfort Zone, not just in investing but in every aspect of our life tends to bring in complacency & that is what is the beginning of a downfall.
If people understand & can perceive the future with Interest Rate Risk, Systemic Risk & several other associated factors, they will automatically venture to think beyond the Comfort Zone

Gautam Haldipur

4 years ago

Dr.Gautam Haldipur, Hubli, Karnataka

Very interesting article indeed. Having invested & worked with different financial products across the spectrum, I would like to make the following observations:-
1. The traditional Indian Investor largely looks for GUARANTEED RETURN PRODUCTS.
2. As it stands today he is in a COMFORT ZONE which he obviously does not want to transgress.
3. The tendency/willingness to take calculated risk is missing which becomes Crystal Clear from the Excel Charts above.
4. His pristine love is for F.D.'s, Real Estate & Gold.
5. Going forward as we integrate with the Global Economy (which I think is irreversible now)the traditional Fulcrum of Investment thinking is slowly but surely going to crumble; what with Deposit rates going down, Inflation perking up & the purchasing power of people going down. Real estate is artificially overvalued without justification & could burst sooner or later. Though Gold is likely to go up, its returns parameters are going to be subdued.
6. The earlier the Investor comes to terms with this reality the better. This truth needs to be taken to him with proper qualified advisory. There is no reason why his mind set cannot change, the percentage though may not be great. With proper Risk Profiling done it is possible.


Vinayak Bhimarao Mudholkar

In Reply to Gautam Haldipur 4 years ago

I am also invested in equities....I do love to take calculated risk; but your calculations go totally wrong when there are frauds &/or mis-goverance....Tell me few names of brokers who don't mis-use the POA....There is no basic safty !!!....India is full of frauds.

Gautam Haldipur

In Reply to Vinayak Bhimarao Mudholkar 4 years ago

With utmost regards to Shri Vinayak Mudholkar, may I request that I be read correctly:-
1.Calculated risk is a relative term. If you like to believe your broker with implicit unquestioned faith, then yes this definition changes. A POA would obviously be given in a PMS & yes it is open to abuse. There are other ways we can deal with this.
2.Study the subject thoroughly & build your stock valuation parameters based on your individual risk profile; most likely you may not go wrong save for for a few blips here & there. You cannot be 100% right all the time. The learning curve in this never ends; it is an ongoing process. After 38 years of investing, yes! I am still learning a lot more of new things. Well! it has taken me close to 20 years to imbibe the art of investing with care.
3. Put in simple terms if you can manage a 25% post tax return on your investment, that will be a great deal.
4.As far as the name of a broker is concerned:- My personal experience with HDFC Securities Ltd.has been fairly good.This online platform is user friendly, fairly good & exhaustive. Most of all its security features are good.However it is marginally more expensive compared to your regular brokers.Good things rarely come cheap.As a Investment Planner I have recommended this to my Client Friends. Believe me, I am yet to hear any of them complain any wrong doing there.As a friend, may I suggest you try this?
5.Last but not the least, please do not despair. There are good things that coexist with the bad things. Things are far better than they were about 20 years ago. To say that I have not had problems would be unfair. I continue to have my share of problems. The only way out is to fight your way out methodically & that is what I precisely do!

Vinayak Bhimarao Mudholkar

In Reply to Gautam Haldipur 4 years ago

Thank you for the explanation & suggestions....Once again thanks.

Panna Thakkar

In Reply to Vinayak Bhimarao Mudholkar 4 years ago

Yes The brokers have misused Power of attorney and have used shares lying in demat a/c .
Where is the saftey ? Why people will come to stock market.
All big names are involved in this thing.
Everywhere there is fraud cheating and lootmaar.
and Govt. is silent because these brokers are funding them


4 years ago

i AM AGREEING WITH YOU.At the same time i like to mention the indian investor is willing to take and accept political risk currency risk country risk natural calamity like flood and drought and business risk all this put together 95 percent. But in india the 95 percent risk is from manipulation and speculation and
above mentioned risks are only 5 percent.How one expect our savers to put money in equity



In Reply to VGANESAN 4 years ago

1) As employees, we are willing to risk our career and future on someone else's enterprise.

2) As customer's will are willing to consume products and services offered by these businesses

3) We will just stand and see foreigners own significant chunks of our businesses.

4) We will also see foreigners set up their business operations in our own country. And some of us will risk our careers there.

5) We will spend our entire lives in India as proud Indians.

6) We will also boast of India's progress & prosperity over the past six decades.

But when it comes to profit from India's growth we start imagining call sorts of excuses. We become the biggest prophets of doom and gloom.

Invest in Indian Businesses and profit from India's growth. India will continue to grow. Have faith.

Vinayak Bhimarao Mudholkar

4 years ago

If I am not wrong, during 2001 - 2003 bear market F & O was just introduced so there was a time correction as against a sharp price correction during 2012-2013. According to me during the next bull run the same F&O will lead to sharp price appreciation irrespective of fundamentals.....If you want to become wealthy grab the untouchables!!!....fundamentally sound but highly priced stocks won't make you wealthy.



In Reply to Vinayak Bhimarao Mudholkar 4 years ago

That's a pretty nasty suggestion.
Would you buy a hotel that serves rotten food and should be closed down any time soon?

Why would you recommend people to compromise on fundamentals?

Shit like this is why people lose money. They think anything and everything will go up and keep buying until everything crumbles.

Vinayak Bhimarao Mudholkar

In Reply to Vinay 4 years ago

I must explain what I mean by "untouchables". During the last bear market there were stocks like Pennar Industries, Diamines & chemicals. The Book Value of both stocks was negative for few years; so they got butchered but when they recovered; they became multibaggers....The eps growth of HUL from 2000 to 2012 is just 5%; but the P/E & P/B ratio is very high. When the tide turns the distressed equities outperform. That is why Tata Capital & Icici Ventures set up a distressed equities fund & expect 25% return!!!....I am not to say each & every distressed co. will turnaround....Do you know - Filelity Liveraged Equities Fund?....It is one of the successful of its kind.(S&P was beaten by it with a 17% average return)


4 years ago

Very good Article to show that Investors are now (in last few years), shying away from Equities.
I am investing in shares since last about 40 years and was quite satisfied (except during last 5/6 years or more). I am investing in IPOs, Rights and buying from market. But am a big looser from my fresh investments made in last few years. Reason? To me (i) Excessive speculation and manipulation. It appears all these F & O s have made very big damage and same must be stopped immediately (ii) Cunning Issue Managers & Advisors, who advise Cos. to price IPOs/Rights aggressively (and selling with Big Advertisements), leaving the investors to only cry. I will be interested to know experience and views of other Investors too.


4 years ago

Right now common people have no interest because it is only speculators who are reaping benefits at the cost of gullible people. The share prices do not reflect the companies performance with only a couple of exceptions. There is a need to link the share prices with performance parameters so that ordinary people will know where to invest.If the market is left in the hands of speculators no improvement is possible.


Vinayak Bhimarao Mudholkar

In Reply to Pantulu 4 years ago

"To link the share prices with performance parameters" is the best idea! doubt!....but we are to live in the world which we don't like.


In Reply to Pantulu 4 years ago

While investing in stocks, being gullible is a major handicap. Sceptics tend to survive and prosper; to be sceptical is a necessary precondition for becoming a better investor.

Vinayak Bhimarao Mudholkar

4 years ago

If you look at the eps growth of HUL (one of the most defencives)since 2000 to 2012 it is roughly 5%(cagr) which is equal to the average after tax returns from bank F. D.(if you are in the 30% tax bracket.) If you want anything beyond that try to withstand volatility!....Though ideally speculation is untouchable; in practice it is not so!!!


4 years ago

Investing in market linked investment products is a matter of individual interest. But before everything else it is an act of faith. If done correctly it yields disproportionately higher rewards. Contrary to popular beliefs, investing like any other profession calls for putting in lot of hard work & continuous learning. – While most people would love to have superior returns, not many are keen to work towards it.


Vinayak Bhimarao Mudholkar

In Reply to Nilesh KAMERKAR 4 years ago

Sir,....I always appreciate your views....In addition to hard work & continuous learning one needs lot of courage because stocks with good fundamentals & relative strength crashed by 50-60% from their respective 52 week high(eg. Yes Bank, Dena Bank)


In Reply to Vinayak Bhimarao Mudholkar 4 years ago

Agree. As Benjamin Graham said

"Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though others may hesitate or differ."


4 years ago

I beg to differ. I think the averseness to equity is also due to financial education. It has been embossed into our minds that equities are risky.

In the circle of people that I know, there is hardly anyone who invests in equities and is even aware of mutual funds. I have trouble explaining the concept of SIP to them. The generation above me never invested in equities and so didn't I in the early part of my career. Those who did coax me to invest in IPOs and do short term profit booking - don't bother about the short term capital gain. My colleagues have bought homes and invested their savings in it. In fact, you get criticized for taking a term plan.

I do agree that Indian savers give importance to safety, but they are not aware of financial and economic jargon like inflation, asset allocation etc.

Vociferous protests across country against political parties slipping out of RTI

A legal activist questions the validity of political parties going out of RTI ambit, while citizen activists in Mumbai, Delhi, Hyderabad and other cities hold public protests

The beginning of this week has witnessed vociferous protests by leading Right to Information (RTI) activists across the country, against Indian government’s amendments to exclude political parties from the RTI Act.



In a release issued by Press Information Bureau (PIB), on 2nd August, the government tries hard to explain that, “the political parties are registered with the Election Commission under the provisions of section 29A of the Representation of the People Act, 1951… which provides for dissemination of information relating to political parties, candidates and donations.’’


It further states there are enough provisions in the Representation of the People Act, 1951 which contains “sufficient provisions in the Act to deal with each and every aspect of financing, its declaration and punishment for filing false affidavit and all such information is made available to the public through the website of the Election Commission.’’ The release also says that since political parties claiming tax exemptions have to file income tax returns, information can be sought by the public under the RTI Act, if the information is in public interest. (detailed press note of PIB below the story).


Exceptions: CPI and AAP oppose amendments:

Communist Party of India (CPI) is an exception amongst the six big political parties, as it has agreed to come under the RTI Act. While speaking at a public meeting in Delhi, D Raja, the party’s leader and a member of Parliament (MP), said, “During elections, given the unholy nexus between capitalists and political parties, there is no doubt that RTI is an invaluable weapon to fight fraudulent and corrupt practices” and he went on to add that the left parties have in the past always opposed all amendments to the RTI Act.  


The upcoming political party, Aam Aadmi Party (AAP) has also opposed the government’s move. On its website, the party says, “The root cause of corruption is political corruption. And political corruption begins with sources of political funding. Transparency in political funding is the need of the day. If Political parties are really serious to fight corruption, they should offer total transparency in their funding. On its part, Aam Aadmi Party has always strived to maintain transparency in all its dealings. It has put up its donors list on the party website. We request all parties to bring in such transparent ways in their functioning so that common man starts believing in politics and politicians.’’


Citizen Protests:

Mumbai: A public meeting was held in Mumbai at the St Xavier’s College Hall at Dhobi Talao on 6th August that was attended by over 350 citizens. Leading RTI activists, media persons and eminent citizens – Shailesh Gandhi, Fr. Frazer, Julio Ribeiro, Bhaskar Prabhu, Sucheta Dalal and Dolphy D’souza spoke on the occasion. Mr Gandhi, the former Central Information Commissioner (CIC) said that every citizen should call MPs and lodge their protest (against the amendment in RTI Act). “"The Parliament has a right to frame a law. But once they've made it, to change it for their benefit is completely third-rate and unacceptable," he said.


Mr Ribeiro, the former commissioner of Police at Mumbai, said citizens are entitled to know where parties got their funding from as many problems arose from the use of black money in elections. “Parties have said that they are not public bodies. Why don't they go to court and prove it?” the supercop said.


Suggestions that came out during the meeting, include sending emails to Congress and United Progressive Alliance (UPA) chairperson Sonia Gandhi, releasing petitions through social media sites and holding a series of protests across the city.

Delhi: A release from National Campaign for People's Right to Information (NCPRI) says,  “Over 500 people from Rajasthan, Madhya Pradesh, Jammu and Kashmir, Gujarat Bihar, UP, Haryana other than Delhi poured into the capital to not only protest against RTI amendments, but also to demonstrate the growing groundswell for the anti-amendment protest. They strongly condemned the proposed move by all political parties to amend the RTI Act. They opposed the undue haste with which all major political parties are seeking to amend the RTI Act, without any consultation and dialogue with the people.


Aruna Roy, leading RTI activist, emphasized that this “anti-people move which has sparked protests in different parts of the country will soon explode into a nation-wide mass protest.”


The online campaign supported by the website Change.Org has within a few hours got nearly 25,000 people signing the petition against the amendments in the RTI Act. The protests have gone global and viral with non-resident Indians (NRIs) from Washington demonstrating and 30 other cities calling several MPs urging them to not push this amendment without due consultation with people.


“It is significant that out of all the six parties that have been declared by the Central Information Commission (CIC) to be ‘public authorities’ under the RTI Act, with the exception of the CPI, all others stayed away from the Jan Manch, organised by the National Campaign for Peoples’ Right to Information (NCPRI).’’


Besides, is it legal for the cabinet committee to put political parties out of RTI ambit?


RTI activist Sunil Ahya argues, “Given the said CIC decision, if they are now able to establish themselves as private authorities or entities in a court of law, then RTI Act in its present legislated form does not apply to them, and the matter rests there for the moment. Until then, they continue to remain established as public authorities, and as such, they happen to come under the ambit of the RTI Act.


“Political parties are either private authorities or public authorities, I am not aware if there is any middle path available to them. They are entities with certain natural attributes, and they would not be able to change or redefine those inherent natural attributes, for example, there is no way they can redefine themselves as a military or security or an intelligence organization,” he said.


Ahya asked, “If by virtue of their access to legislators they make amendments, whereby, they take themselves outside the ambit of the RTI Act, whereas other public authorities continue to remain within the ambit of the RTI Act, then the question is, would they not be enacting a law which violates Article 14 of the Constitution of India titled ‘Equality Before Law’?” The law lays down that ‘the State shall not deny to any person equality before the law or the EQUAL PROTECTION OF THE LAWS within the territory of India’.  


“Equal Protection of Law” means if political parties need to be protected because their functioning may get affected by virtue of coming under the RTI Act, then similarly other public authorities also need to be protected because their functioning too gets affected in some way or the other. If the functioning of political parties is affected, then so is the functioning of other Public Authorities, at least that is what the preamble of the RTI Act suggests,’’ he said.

“If political parties get exempted, leaving other public authorities under the ambit of the RTI Act, then the Act, in effect would be contravening Article 14 of the Constitution by way of a legislative enactment, which by a reasonable inference would mean an indirect amendment of the basic structure of the Constitution, ’’Ahya added.


RTI activist, Maj Gen Sudhir Jatar (retd) said, “In South Africa, the Promotion of Access to Information Act, 2000 (PAI Act) is applicable to private bodies also. In the court case regarding applicability to political parties [IDASA & Others Vs ANC and Others 2005 (5) SA 39 CPD], the court held that political funding is not for a public purpose because parties pursue private interests of their members even if they may ultimately govern the country(which is clearly a political purpose). The court also held that the difference between private and public bodies is, by no means, impermeable. It held that the PAI Act, 2000 is not applicable to political parties.


I had quoted the above statement only for information and not as a precedent, because PAI Act of South Africa and RTI Act of India are different as compared to other countries and hence, the interpretation will not be the same.  The aim of the RTI Act is to ultimately improve governance. It is the political parties that are mainly responsible for bad governance but are not accountable for it. Since money is the root cause, as seen again in Durga Shakti Nagpal’s case in UP, there is more urgency to control political finance.


Why not put pressure on corporates?


Mumbai based RTI activist Krishnaraj Rao along with 10 other activists have appealed to leading industrialist Anil Ambani and others to make his donations to public parties available in the public domain.


Krishnaraj Rao argues that, “Political parties have always succeeded in putting a veil over their funding, despite all rules and regulations. The legal bribery known as ‘campaign contributions’ (and routine contributions to individual members of legislative assembly-MLAs and MPs), turns party chiefs, ministers and legislators into agents of the Tatas-Birlas-Ambanis, big builders, hoteliers, tanker-lobbies and sand-mining mafias. Our votes become meaningless; our democracy hijacked by ‘donations’.”


“Corporate lobbyists are using such ‘donations’ to arm-twist the government to relax environmental and health norms, enabling commercial activities such as putting up 75% unauthorized cell phone towers and selling harmful drugs banned by USFDA,” he said.


Government’s press release on the amendment to the RTI Act, 2005


The Union Cabinet has approved introduction of a Bill in the coming session of the Parliament to amend the Right to Information Act, 2005, to exclude the political parties from the definition of Public authority for the purpose of the Act.


The Central Information Commission (CIC) in its decision dated 03.06.2013, has held that the political parties, namely, AICC/INC, BJP, CPI(M), CPI, NCP, and BSP are public authorities under Section 2(h) of the RTI Act. While deciding that the said political parties are public authorities, the CIC has relied mainly on the grounds that there is substantial (indirect) financing of political parties by the Central Government and they perform public duty.


The political parties are registered with the Election Commission under the provisions of section 29A of the Representation of the People Act, 1951. Under this section any small group of persons, if they so desire, can be registered as a political party by making a simple declaration under sub-section (5) of section 29A.


With reference to the political parties, detailed provisions exist in the Representation of the People Act, 1951 which provides for dissemination of information relating to political parties, candidates and donations. The said Act, inter alia, provides for –


Registration with the Election Commission of associations and bodies as political parties (section 29A)

Political parties entitled to accept contribution (section 29B)

Declaration of donation received by the political parties (section 29C)

Declaration of assets and liabilities (section 75A)

Account of election expenses and maximum thereof (section 77)

Lodging of account with the district election officer (section 78)

Penalty for filing false affidavit etc. (section 125A)


The above provisions of the Representation of the People Act, 1951 indicate that there are sufficient provisions in the Act to deal with each and every aspect of financing, its declaration and punishment for filing false affidavit and all such information is made available to the public through the website of the Election Commission.


Under section 13A of the Income-tax Act, 1961, the political parties claiming exemption from tax are required to file their return of income before the due date before the tax authorities along with audited accounts; and form 24A prescribed under section 29C of the Representation of the People Act, 1951 read with Rule 85B of the Conduct of Election Rules, 1961 declaring the list of persons making donations to the political parties exceeding 20,000/- rupees.


As per section 138 of the Income-tax Act, any information with the Income-tax Department would be ordinarily held confidential, but can be made public, if in the judgment of the Commissioner of Income-tax, it serves public purpose.


Under section 10A of the Representation of the People Act, 1951, for failure to lodge the account of election expenses as per the requirement of law, the defaulting candidate may be disqualified by the Election Commission for three years from the date of the order of disqualification.


Section 29C of the Representation of the People Act, 1951, provides that each political party shall submit report to the Election Commission (before filing its income-tax return) regarding all contributions in excess of 20000/- rupees received by it in a financial year and failure to submit this report will deprive them of the tax benefit. Further, the candidates are required to file affidavit along with their nomination papers giving the annual income of the candidate and filing of false affidavit attract punishment for furnishing wrong information.


The RTI Act was enacted to provide for an effective framework for effectuating the right of information recognised under Article 19 of the Constitution. The RTI Act was enacted to ensure greater and more effective access to information by making the Freedom of Information Act, 2002 more progressive, participatory and meaningful.


The definition of public authority given in clause (h) of section 2 of the RTI Act is well defined to include only such authority or body constituted by or under the Constitution or by any law made by Parliament which is substantially financed directly or indirectly by funds provided by the appropriate Government. The political parties do not fall within the parameters of the definition of public authority given in the RTI Act, as they are only registered and recognised under the RP Act, 1951.

(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)




4 years ago

If Parliament does amend the RTI Act exempting poltical parties from being public authorities , what is the next step for civil society , file a PIL in the Supreme Court challenging this amendment ????????

Neela Govindaraj

4 years ago

Our elected representatives have become arrogant and certainly there is a conflict of interest when they frame laws for themselves. There has to be some way of countering the Parliament. That "Parliament is Supreme" sounds like they are God.

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The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)