Electoral bonds

Electoral bonds are promissory notes issued by the government, they are authorized by the State Bank of India and can be purchased by any citizen of India or any company registered in India if they want to donate funds to any political party of their choice eligible for getting the funding.

This article will provide key insights for GS Paper-II of Polity section of the UPSC IAS Exam.

Content

• What is Electoral bond?
• Procedure of donation through Electoral bonds
• Conditions of Electoral bonds
• Benefits of Electoral bonds
• Disadvantages of Electoral bonds
• Criticisms of Electoral bonds
• Conclusion
• FAQs

What is Electoral bond?

• Electoral bond is an instrument through which anyone can donate money to political parties.
• They can be purchased by any Indian citizen or a company registered in India.
• These bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.
• They can be bought from authorized branches of the State Bank of India.
• These were introduced with the Finance Bill (2017).
• Electoral Bond Scheme was notified by government of India in 2018 to cleanse the system of political funding in the country and increase cashless economy.

Procedure of donation through Electoral bonds:

• A donor is required to pay the amount via a cheque or a digital mechanism (cash is not allowed) to the authorised 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.
• The process ensures that the name of the donor remains anonymous.

Conditions of Electoral bonds:

• Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 and has secured at least 1% of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds.
  • The party will be allotted a verified account by the Election Commission of India (ECI) and the electoral bond transactions can be made only through this account.
• The electoral bonds will not bear the name of the donor.
  • Thus, the political party might not be aware of the donor’s identity.

Benefits of Electoral bonds:

• All electoral bonds issued are to be redeemed by a bank account that the Election Commission of India has disclosed; hence the malpractice is strengthened.
• The widespread use of electoral bonds can help to hold back political parties who operate with the goal of simply collecting funds from the public.
  • It is because only registered parties attaining at least 1% ofthe votes in the general election can receive electoral funding.
• Electoral bonds work with the government goal to make election funding safe and digitized.
  • Therefore, any donation going above Rs. 2000 is not legally required to be in the form of electoral bonds and cheques.
• All transactions of electoral bonds are carried out via cheques or digitally.

Disadvantages of Electoral bonds:

• Some critics say that electoral bonds have been brought into operation with the primary purpose of choking the funding of opposition parties.
• Electoral bonds do not threaten financially stable companies in any way.
  • The goal of these companies is to fund one political party over another.
• This is further promoted by the limit of donating 7.5% of the company’s annualized profits towards a political party being abolished.

Criticisms of Electoral bonds:

• The central criticism of the electoral bonds scheme is that instead of bringing transparency, they are more suspicious ways of funding to the government in power by big corporates.
• The anonymity of electoral bonds is only for the broader public and opposition parties.
  • Electoral bonds are sold via a government-owned bank (SBI) that leaves the door open for the government to know exactly who is funding its opponents.
  • This allows the possibility for the government to either extort money, especially from the big companies, or victimise them for not funding the ruling party either way providing an unfair advantage to the party in power.
  • The money donate through Electoral bonds is not taxable and there is no cap on the amount of money donated through electoral bonds.
  • Rich people and organisations that heavily fund the party during elections can easily influence the policies and decisions of the party.
• Introducing electoral bonds was done for allowing common people to fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).
• There was a cap on how much a company could donate to a political party i.e., 7.5% 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 corporates.

Conclusion:

The practice of electoral bonds is not totally transparent but a good motive for getting funds from the common people who want to contribute to the winning of their favourite political party. But there is a need to bring accountability and answerability of the funding received. There should also be cap on the donating capacities of an individual or a company otherwise the big ventures donating large amount of money will be in position to control politics of the country and it will have no benefits of bringing this transparent scheme for election fundings.

Ref:Source-1

Other Articles in Economy
Infrastructure investment trusts (InvITs)	Funds of Central Government in India
Cash Management Bills (CMBs)	Participatory Notes
External Commercial Borrowing	Financial Inclusion and Inclusive Growth

FAQs (frequently asked question)