Electoral Bonds
Why in News
The Supreme Court flagged the possibility of misuse of money received by political parties through
electoral bonds for ulterior objects like funding terror or violent protests.
The court also asked the government whether there is any “control” over how these donations
were used by political parties.
Electoral Bond
Electoral Bond is a financial instrument for making donations to political parties.
The bonds are issued in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and Rs. 1 crore
without any maximum limit.
State Bank of India is authorised to issue and encash these bonds, which are valid for fifteen
days from the date of issuance.
These bonds are redeemable in the designated account of a registered political party.
The bonds are available for purchase by any person (who is a citizen of India or
incorporated or established in India) for a period of ten days each in the months of January,
April, July and October as may be specified by the Central Government.
A person being an individual can buy bonds, either singly or jointly with other individuals.
Donor’s name is not mentioned on the bond.
Key Points
Background: The Electoral Bond Scheme acts as a check against traditional under-the-
table donations as it insists on cheque and digital paper trails of transactions, however, several
key provisions of the scheme make it highly controversial.
Misuse of Electoral Bonds as Pointed Out in the Supreme Court:
Anonymity: Neither the donor (who could be an individual or a corporate) nor the political
party is obligated to reveal whom the donation comes from.
Asymmetrically Opaque: Because the bonds are purchased through the State Bank of
India (SBI), the government is always in a position to know who the donor is.
This asymmetry of information threatens to colour the process in favour of
whichever political party is ruling at the time.
Chanel of Blackmoney: Elimination of a cap of 7.5% on corporate donations, elimination
of requirement to reveal political contributions in profit and loss statements and also the
elimination of the provision that a corporation must be three years in existence, undercuts
the intent of the scheme.
A shell company can donate an unlimited amount anonymously to a political party
giving it a convenient channel for business to round-trip its cash parked in tax
havens for a favour or advantage granted in return for something.
Government’s Defence:
Conditions for Electoral Bonds: Only parties registered under the Representation of
the People Act 1951 could receive donations through electoral bonds, and they also
should not have secured less than 1% of the votes polled in the previous elections.
To Take on the Menace of Black Money in Politics: Only white money is involved in
the Bonds as the amounts are paid only through cheque or demand draft.
KYC norms are also followed.
Election Commision of India’s Support: ECI was not opposed to the bonds but was only
concerned about the aspect of anonymity.
It also urged the court not to stay the bonds and said the scheme is one step
forward compared to the old system of cash funding, which was
unaccountable.
Way Forward
There is a need for effective regulation of political financing along with bold reforms to
break the vicious cycle of corruption and erosion of quality of democratic polity.
It is crucial to plug the loopholes in the current laws to make the entire governance
machinery more accountable and transparent.
Voters can also help bring in substantial changes by demanding awareness campaigns. If
voters reject candidates and parties that overspend or bribe them, democracy would move a step
higher.
Source:TH
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