Q.4. What are electoral bonds? Are they capable of bringing transparency in the political funding system?

Electoral bonds are interest-free bearer bonds or money instruments that can be purchased by companies and individuals in India from authorized branches of the State Bank of India (SBI). 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 purchased through a KYC-compliant account to make donations to a political party. The name and other information of the donor are not entered on the instrument, making electoral bonds anonymous. There is no cap on the number of electoral bonds that a person or company can purchase.

Here’s how electoral bonds work:

1. Issuance: Electoral bonds are issued by authorized banks at specific intervals, typically a few times a year.
2. Purchase: Eligible individuals or entities, including companies and registered political parties, can purchase electoral bonds from designated branches of authorized banks. These bonds can be bought either through digital channels or by visiting the bank in person.
3. Donation: Once purchased, the electoral bonds can be donated to registered political parties of the donor’s choice. These bonds serve as a legal mode of making political contributions.
4. Redemption: Political parties can encash the electoral bonds within a specified period, typically within 15 days of issuance. The funds received through electoral bonds are credited to the party’s designated bank account, monitored by the Election Commission of India (ECI).

Rationale behind electoral bonds:

• Transparency: Electoral bonds were introduced with the aim of enhancing transparency in political funding. By routing donations through bonds, the identities of individual donors remain anonymous, but the transactions are recorded by the issuing banks and monitored by regulatory authorities.
• Anonymity: While they provide anonymity to donors, electoral bonds have faced criticism for potentially facilitating corruption. Critics argue that the lack of disclosure regarding the donor’s identity undermines transparency and accountability in the political funding system.

The recent Supreme Court ruling declared the government’s electoral bond scheme as unconstitutional, emphasizing the need for transparency and information about the sources of funding for political parties. The debate continues, with ongoing discussions about the funding of political parties and the balance between transparency and donor anonymity. Ultimately, electoral bonds remain a subject of scrutiny and reform in India’s political landscape.