ELECTORAL BONDS

1. Context 

2. Key points 

• As much as Rs 660.25 crores of EBs 97.63 per cent of the bonds sold were encashed by political parties at the New Delhi Main branch of State Bank of India.
• SBI is the only bank authorised to issue EBs to political parties.
• SBI said EBs worth Rs 309.45 crores were sold by the Mumbai Main branch and Rs 222.40 crores by the New Delhi Branch.
• With this, the total amount collected by parties through EBs has gone up to Rs 11, 467 crores from various anonymous donors in 23 phases since 2018 when the Electoral Bond Scheme was introduced.

3. Electoral bonds

• Simply, electoral bonds are a debt instrument through which anyone can donate money to political parties.
• Such bonds are a debt instrument through which anyone can donate money to political parties.
• Such bonds are sold in multiples of Rs 1,000, Rs 10, 000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore and can be bought from authorised branches of the State Bank of India.

• 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.

4. Reasons for introducing electoral bonds

1. The country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections.
2. Political parties continue to receive most of their funds through anonymous donations which are shown in cash.
3. An effort, therefore, requires to be made to cleanse the system of political funding in India. 

5. Introducing electoral bonds

1. The reduction of the amount of money that a political party could accept in cash from anonymous sources from Rs 20, 000 to Rs 2, 000.
2. The introduction of electoral bonds is a way to make such funding more transparent. 

6. 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.
• 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.
• This, in turn, allows the possibility for the government of the day 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.
• 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 per cent of the bonds have been of the highest denomination (Rs 1 crore).

7. Learning outcomes

• 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.

8. Election commission's stand 

• 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 Minister the same month, the Commission had even asked the government to 'reconsider' and "modify" the above amendment.

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