Explained | Electoral Bonds Scheme

The government approved the issuance of the 28th tranche of electoral bonds that will open for sale for 10 days beginning October 4.

What is the Electoral Bonds Scheme?

• Electoral bonds have been pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding. However, Opposition parties have been raising concerns about alleged opaqueness in funding through such bonds.

• The government of India notified the Electoral Bonds Scheme in January 2018. Under this scheme, bonds for contributions to political parties can be issued by the State Bank of India, and can be bought by any donor with a Know Your Customer (KYC) compliant account.

• Sale of the first batch of electoral bonds was scheduled from March 1-10, 2018.

• Electoral bonds may be purchased by a person, who is a citizen of India or a body incorporated or established in India. 

• It is issued in the nature of a promissory note which shall be a bearer banking instrument. It shall not carry the name of the buyer.

• The bonds shall be issued in the denomination of Rs 1,000, Rs 10,000, Rs 1,00,000, Rs 10,00,000 and Rs 1,00,00,000. 

• The State Bank of India (SBI) has been authorised to issue and encash electoral bonds through its select branches.

• Only the political parties registered under Section 29A of the Representation of the People Act, 1951 and which secured not less than 1 per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the state, shall be eligible to receive the electoral bonds.

• The electoral bonds shall be valid for 15 calendar days from the date of issue and no payment shall be made to any payee political party if it is deposited after the expiry of the validity period.

Row over electoral bonds

• According to the central government, electoral bonds are introduced to ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public. It would keep a tab on the use of black money for funding elections. In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses.

• However, experts are of the view that if the electoral bonds scheme has been introduced to bring about greater transparency, the government must not restrain from allowing details of such donations to be made public. 

• Since neither the purchaser of the bond nor the political party receiving the donation is required to disclose the donor’s identity, the shareholders of a corporation will remain unaware of the company’s contribution. Voters, too, will have no idea of how, and through whom, a political party has been funded.

• Critics of the scheme argue that since the identity of the donor has been kept anonymous, it could lead to an influx of black money. 

• According to civil rights societies, the concept of donor anonymity threatens the very spirit of democracy. 

• The Election Commission had also expressed reservations on electoral bonds and the provision for non-disclosure of contributions as it felt would cast a shadow on transparency and accountability in political funding.