New Delhi: In April 2019, right before the general elections, India’s billionaire banker Uday Kotak had asked the then Finance minister Arun Jaitley about the opaque scheme to donate political parties.

The Collective has now found that a Kotak group company made political donations using the same scheme that Uday Kotak had questioned.

“How do you see the path towards electoral reforms and the role of electoral bonds in that journey,” Kotak had asked Jaitley at an industry event in 2019. The electoral bond scheme was introduced only a year earlier.

Jaitley had brushed off his concerns calling the debate around electoral bonds as “ill informed”. “The bank knows your identity, your balance sheet will disclose your name, that you bought so many bonds,” Jaitley had reportedly replied.

Merely seven months later, a less-known privately held company of the Kotak group began donating money through electoral bonds to political parties, The Reporters’ Collective has found. 

Infina Finance Private Limited bought electoral bonds worth Rs 60 crore. The financial services provider was incorporated in April 1996 and has a paid up capital – money that a company gets from shareholders – of Rs 2.2 crore. It is headquartered in Mumbai.

Infina Finance is jointly owned by Kotak Mahindra Bank through its subsidiary Kotak Mahindra Capital Company Ltd (49.99%) and Kotak family (50.01%).

The ratings agency, Care Rating notes, “The business (of Infina Finance) is strategic and an integral part of the Kotak Group.”

It adds, “The Board of Directors comprises prominent individuals …The Board of Directors of IFPL comprises six members, of which five are non-executive and one is an Independent director; it includes Suresh Kotak and Jaimin (Mukund) Bhatt, Group President & Group Financial Officer of Kotak Mahindra Bank Limited.”

The Collective looked at the corporate profile of Jaimin Mukund Bhatt. 

He is a nominee director in Business Standard Private Limited, a national business newspaper of the Kotak group. Bhatt and other directors of the company hold directorships in various other Kotak group companies.

Infina Finance bought electoral bonds in three windows, Rs 25 crore in October 2019, Rs 10 crore in January 2020 and Rs 25 crore in April 2021.

In financial year 2019-20, the company suffered a loss of Rs 53.7 crore before tax yet it donated Rs 35 crore through electoral bonds to political parties. This could be done legally because the Union government had amended laws in 2017 to permit even loss making companies to donate to political parties. Before that, firms were allowed to donate only up to 7.5% of their last three year’s average profits to political parties. 

In financial year 2021-22, the Kotak company donated another Rs 25 crore to political parties. This year it had done better. It earned Rs 347.25 crore profit before tax.

The bank and its promoter Uday Kotak had a long-running feud with the Reserve Bank of India (RBI). In 2012, the RBI wanted Uday Kotak to bring down his shareholding in the bank to 10%. In this dispute, Kotak Bank took the unprecedented step of taking the banking regulator RBI to court in 2018. 

The matter was settled with RBI in January 2020. RBI relented to let him hold a 26% stake in the bank. Subsequently, Uday Kotak resigned as promoter-CEO of the company in September 2023 and instead became a non-executive director in the company. 

Recently, in October 2023, the Reserve Bank of India penalised the bank for non-compliance with regulatory requirements, particularly failing “to carry out annual review or due diligence of the service provider”, Livemint reported.