What are electoral bonds?
- Electoral bonds are an instrument through which anyone can donate money to political parties.
- Such bonds, which are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, can be bought from authorized branches of the State Bank of India.
- As such, a donor is required to pay the amount via a cheque or a digital mechanism (cash is not allowed) to the authorized SBI branch.
- The donor can then give this bond to the party or parties of their choice.
- The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses. On the face of it, the process ensures that the name of the donor remains anonymous.
When were electoral bonds introduced and why?
- The central idea behind the electoral bonds scheme was to bring about transparency in electoral funding in India.
- The government reduced the amount of money that a political party could accept in cash from anonymous sources — from Rs 20,000 to Rs 2,000.
- The introduction of electoral bonds as a way to make such funding more transparent. Formally, these bonds were introduced in 2018.
Why have electoral bonds attracted criticism?
- The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do: bring transparency to election funding.
- For example, critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties.
- The fact that such bonds are sold via a government-owned bank (SBI) leaves the door open for the government to know exactly who is funding its opponents, providing an unfair advantage to the party in power.
- Further, one of the arguments for introducing electoral bonds was to allow common people to easily fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).
- Moreover, before the electoral bonds scheme was announced, there was a cap on how much a company could donate to a political party: 7.5 per cent of the average net profits of a company in the preceding three years.
- However, the government amended the Companies Act to remove this limit, opening the doors to unlimited funding by corporate India.