Electoral Bonds

Why is in news? Ahead of Telangana polls, Hyderabad emerges as top choice for sale, redemption of electoral bonds

With the Telangana Assembly elections slated for December, Hyderabad was the top choice for buyers and users of electoral bonds (EBs) in the most recent tranche of sales, a Right to Information (RTI) reply from State Bank of India showed. The city accounted for 33 per cent of all sales and 43 per cent of EBs redeemed in July.

About the Scheme:

The Electoral Bond Scheme was notified on January 29, 2018.

An Electoral Bond is like a promissory note that may be purchased by a person who is a citizen of India or incorporated or established in India.

A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.

The bonds are like banknotes that are payable to the bearer on demand and are interest-free.

State Bank of India is authorised to issue and encash these bonds.

Electoral bonds are purchased anonymously by donors and are valid for 15 days from the date of issue.

As debt instruments, these can be bought by donors from a bank, and the political party can then encash them.

These can be redeemed only by an eligible party by depositing the same in its designated account maintained with a bank.

The bonds are issued by SBI in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.

The bonds are available for purchase by any citizen of 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 — and an additional 30 days of sales in a Lok Sabha election year.

The scheme was then amended in November 2022 to add another 15 days of sales in any Assembly election year.

Eligibility of Political Parties:

Only the Political Parties registered under Section 29A of the Representation of the People Act (RPA), 1951 (43 of 1951) and which secured not less than one percent 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.

Benefits of Electoral Bonds:

More Transparency: It helps the political parties to operate in a more transparent manner with the election commission, regulatory authorities and the general public at large.

Ensures Accountability: Donations through Electoral Bonds will only be credited in the party bank account disclosed with the ECI. As encashment of all the donations are through banking channels, every political party shall be obliged to explain how the entire sum of money received has been expended.

Discouraging Cash: The Purchase will be possible only through a limited number of notified banks and that too through cheque and digital payments. Cash will not be encouraged.

Maintains Anonymity: The individuals, groups of individuals, NGOs, religious and other trusts are permitted to donate via electoral bonds without disclosing their details. Therefore, the identity of the donor is being preserved.

Challenges for Electoral Bonds:

Hindering Right to Know:

Voters will not know which individual, company, or organisation has funded which party, and to what extent.

Before the introduction of electoral bonds, political parties had to disclose details of all its donors, who have donated more than Rs 20,000.

The change infringes the citizen’s ‘Right to Know’ and makes the political class even more unaccountable.

Shallow Anonymity:

Anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI).

This implies that the only people in the dark about the source of these donations are the taxpayers.

Unauthorized Donations:

In a situation where the contribution received through electoral bonds are not reported, on perusal of the contribution report of political parties, it cannot be ascertained whether the political party has taken any donation in violation of provision under Section 29B of the RPA, 1951 which prohibits the political parties from taking donations from government companies and foreign sources.

Leading to Crony-Capitalism:

It could become a convenient channel for businesses to round-trip their cash parked in tax havens to political parties for a favour or advantage granted in return for something.

Anonymous funding might lead to infusion of black money.

Loopholes:

Corporate Entities may not enjoy the benefit of transparency as they might have to disclose the amount donated to the Registrar of Companies;

Electoral bonds eliminate the 7.5% cap on company donations which means even loss making companies can make unlimited donations etc.

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.

Switching to digital transactions is one quick fix that can be used. This guarantees the donor acceptable privacy and adequate transparency.

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.

The Right to Information Act can improve transparency by including political parties.

At the same time, the bonds should ensure that the funds being collected by the political parties are accounted for clean money from the appropriate channels without any obligation of give and take.