What are Electoral Bonds?
- An electoral bond is designed to be an interest-free bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand.
- It can be purchased by any citizen of India or a body incorporated in India. A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.
- The electoral bonds were announced in the 2017 Union Budget.
- The bonds will be issued in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore and will be available at specified branches of State Bank of India. SBI is the only authorised bank to issue such bonds.
- They can be bought by the donor with a KYC-compliant account.
- The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October as specified by the Central Government.
- The donor will remain anonymous. The electoral bonds will not bear the name of the donor. The intention is to ensure that all the donations made to a party will be accounted for in the balance sheets without exposing the donor details to the public.
- Political parties are allotted a verified account by the Election Commission and all the electoral bond transactions are done through this account only.
- Only political parties registered under Section 29A of the Representation of the Peoples Act, 1951 and have secured no less than one per cent votes in the last General Election to the House of the People or the Legislative Assembly of the State, are eligible to receive electoral bonds.
- A donor will get tax deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.
- The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of a criminal case by any law enforcement agency.
- The key critique is that, for something meant to bring transparency to the system, electoral bonds actually make political funding more opaque – but only for the public. Companies don’t have to say who they are donating money to and parties don’t need to say from whom they’re getting the cash.
- Experts have said this undercuts the freedom of political information, which is an integral element of Article 19(1)(a) of the Constitution (the free expression clause).
- Prior to 2017, Companies Act, 2013, stipulated that a company can donate only up to 7.5% of its average profit of the last three years. Now, through the electoral bonds, there is no limit to the amount companies can donate, opening the doors to unlimited funding by corporate India.
- In 2016 and 2017, amendments were made to the Foreign Contribution (Regulation) Act (FCRA), 2010, with retrospective effect. Thus, enabling the Indian subsidiaries of foreign companies to make donations to political parties through electoral bonds.
- This allows anonymous financing by foreign entities opening Indian elections to the influence of foreign interests.
- The Reserve Bank of India (RBI) and the Election Commission had both said the sale of electoral bonds had become an avenue for shell corporations and entities to park illicit money and even proceeds of bribes with political parties.
- The Election Commission of India criticised electoral bonds saying it would wreck transparency in political funding and allow for unchecked foreign funding of Indian political parties.
- However, the government defended the scheme, saying it allowed anonymity to political donors to protect them from “political victimisation”.
Why in News?
- Pointing to a concentration of political funding, five cities, Mumbai, Kolkata, Hyderabad, New Delhi and Chennai, accounted for nearly 90% of all electoral bonds sold so far.
- As per State Bank of India data accessed under the Right to Information Act, electoral bonds worth Rs 12,979.10 crore had been sold since the start of the scheme in 2018 until the most recent tranche, the 26th, of sales held in April.
- Mumbai, the country’s financial capital, accounted for 26.16% of the total electoral bonds sold so far, the highest among the 29 SBI branches where the scheme is offered, with Rs 3,395.15 crore.
- The Electoral Bond Scheme was launched in January 2018 and the first tranche of sales was held in March that year. The scheme was initially introduced for a period of 10 days each in January, April, July and October and an additional 30-day period for a year with Lok Sabha elections.
- In November 2022, the Finance Ministry amended the scheme to allow another 15 days of sales in any year with an Assembly election.