What are electoral bonds?

Electoral bonds are a new and unique concept introduced by Modi government in a Finance Bill 2017. The idea behind the use of electoral bonds is to promote transparency in political funding and curb the usage of black money.

The electoral bonds are in form of promissory notes that are payable to the bearer on demand and is interest free. These bonds can be purchased by any Indian citizen or company incorporated in India from select authorized branches of State Bank of India. The citizen or company can then donate the same to any eligible political party of their choice.

What are the conditions to use Electoral Bonds?

Bonds are issued in denominations of INR thousand, ten thousand, lakh, 10 lakh and 1 crore and are available at specified branches of State Bank of India only. To buy these bonds one needs a KYC complaint bank account. After donation to the party, the party can encash it only through their verified account within 15 days. However, only those political parties are eligible to encash these bonds which have secured at least 1 percent of the votes polled in the most recent Lok Sabha elections.

Why Electoral Bonds?

The year round functioning of political parties involve a large expenditure to run offices, pay staff salaries, travelling expenses etc. Besides expenditure of individual candidates, political parties have to spend money on election campaigns, publicity, tours, travels and election related establishments. These expenditures run into hundreds of crores.  Yet there has not been a transparent funding mechanism of the political system.

The conventional system of political funding is to rely on donations. These donations come from varied sources like political workers, sympathizers, small and large businesses and industrial houses. The conventional practice of funding the political system was to take donations in cash and undertake these expenditures in cash.  The sources are anonymous.

The electoral bond scheme envisages total clean money and substantial transparency into the system of political funding. Since the donor will purchase the bonds through a banking instrument, he would have to disclose in his accounts the amount of electoral bonds he has purchased. Also, since the bond can only be encashed in a pre-declared account of a political party, every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the Election Commission.

As against a total non-transparency in the present system of cash donations where the donor, the donee, the quantum of donations and the nature of expenditure are all undisclosed, some element of transparency would be introduced in as much as all donors declare in their accounts the amount of bonds that they have purchased and all parties declare the quantum of bonds that they have received.

Even though there have been certain a concern, from several quarters, including Election Commission of India, the scheme has been implemented. According to an RTI Electoral bonds worth 1407 crores have been sold between Aril 2018 to January 2019.