Electoral Bond Scheme

In News

• Chief Justice of India N V Ramana has assured petitioners that the Supreme Court will take up for hearing a pending plea challenging the Electoral Bond Scheme, 2018. 
  • Two NGOs — Common Cause and Association for Democratic Reforms (ADR) — have challenged the scheme, alleging that it is “distorting democracy”. 

Electoral Bonds Scheme

• Features:
  • Introduced with the Finance Bill, 2017, the Electoral Bond Scheme was notified on January 29, 2018.
  • Electoral bonds is an instrument through which anyone can donate money to political parties
  • It 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
  • There is no limit on the number of bonds an individual or company can purchase.
  • The bonds that are not encashed by a party within 15 days are deposited by the SBI into the Prime Minister’s Relief Fund.

• Conditions : 
  • Any party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent 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.

• Procedure
  • The State Bank of India (SBI) has been authorised to issue and encash Electoral Bonds through its 29 Authorised Branches.
  • The bonds are sold by the SBI in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
  • One can purchase these bonds only digitally or through cheques.
  • The Electoral Bonds can be encashed by an eligible Political Party only through a Bank account with the Authorised Bank.
  • The Electoral Bond deposited by an eligible Political Party in its account is credited on the same day.
  • Electoral Bonds shall be valid for fifteen calendar days from the date of issue and no payment is being made to any payee Political Party if the Electoral Bond is deposited after expiry of the validity period. 

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.
• Unauthorised 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.

Supreme Court’s Stance on Electoral Bonds

• The Supreme Court (SC) agreed that the scheme protects the identity of purchasers of electoral bonds in a cloak of anonymity, but highlighted that such purchases happened only through regular banking channels.
• In 2019, the Supreme Court asked all the political parties to submit details of donations received through electoral bonds to the ECI. It also asked the Finance Ministry to reduce the window of purchasing electoral bonds from 10 days to five days.
• The Election Commission of India (ECI) also told the Supreme Court of India that while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties.

(Image Courtesy: The Hindu)

Election Commission’s stand on electoral bonds

• The Election Commission, in its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in May 2017, had objected to the amendments in the Representation of the People (RP) Act, which exempt political parties from disclosing donations received through electoral bonds.
•  It described the move as a “retrograde step”. In a letter written to the Law Ministry the same month, the Commission had even asked the government to “reconsider” and “modify” the above amendment.
• The Election Commission on April 10, 2019 told the Supreme Court of India that while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties.

Reserve Bank of India on electoral bonds scheme

• According to an article published by HuffPost India on November 18, 2019, the RBI was critical of the scheme. The central bank had warned the government that the bonds would “undermine the faith in Indian banknotes and encourage money laundering.”

Way Forward

• The government may reconsider and modify certain provisions of the Electoral Bonds Scheme to ensure full disclosure and transparency.
• 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.

Source:IE