Electoral bonds and their fundings in INDIA Flashcards
Why in News?
State Bank of India has released the data with regards to the total donations to the different political parties via electoral
bonds. Donations to political parties through electoral bonds (EBs) have crossed the Rs 10,000-crore mark, with parties
getting another Rs 389.5 crore through such bonds in the 21st sale of EBs conducted between July 1 and 10.
With this, the total amount collected by parties has gone up to Rs 10,246 crore from various anonymous donors in 21
phases since 2018 when the EB scheme was introduced.
Latest round of Donations
As many as 475 EBs worth Rs 389.5 crore were redeemed by parties in the latest phase, SBI, the only bank authorised to
sell these bonds, said in its reply to the RTI application filed by Commodore Lokesh K Batra (Retd). Significantly, this
amount has been collected by the political parties even though no election is scheduled in any of the states in the near
future
What are Electoral bonds?
An electoral bond is a promissory note that can be purchased from specified State Bank of India branches by any Indian person or company formed in India. The citizen or business can subsequently donate the funds to any eligible political party of his or her choosing. The bonds are similar to banknotes in that they are non-interest bearing and receivable to the bearer on demand. Individuals or parties will be able to buy these bonds digitally or with a check. The UPSC Indian Polity and Governance Syllabus include Electoral Bonds which is described in this article.
.1.The Finance Bill of 2017 established “Electoral bonds” as interest-free bearer products (similar to Promissory Notes) that can be purchased from the State Bank of India within a 10-day window in each quarter of the financial year.
2.Individuals and domestic corporations can submit these bonds, which are issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore and must be redeemed within 15 days, to political parties of their choice, according to the program, which was declared on January 2, 2018.
3At the time of purchase, buyers of the bonds must provide complete KYC details. However, the political party that receives the bond is not compelled to declare the identity of the entity that gave it the bond (s).
About Electoral Bonds
The Union government has exempted political parties from revealing contributions made through electoral bonds
through an amendment to the Finance Act of 2017.
This implies that the electorate won’t be aware of who, what, or how much has been contributing to which party.
However, voters choose the individuals who will represent them in Parliament in a representational democracy.
Electoral Bonds – Features
o These bonds may only be issued and redeemed by State Bank of India.
o Donors acquire electoral bonds in an anonymous manner, and they are only good for 15 days after they are issued.
o Donors may purchase them from a bank as debt instruments, which the political party may then redeem.
o Only an approved person may redeem these by depositing the funds into a designated account held with a bank.
o SBI issuing bonds in denominations of 1,000, 10,000, one lakh, ten lakh, and one crore rupees.
o For a total of ten days in each of the months of January, April, July, and October, as determined by the Central
Government, any Indian citizen may purchase the bonds.
o Election bonds can only be received by political parties that are registered under Section 29A of the Representation
of the People Act, 1951, and that received at least 1% of the votes cast in the most recent general election for the
House of People or the Legislative Assembly
Electoral Bonds – Importance
They ensurethat the money collected by political parties is either accounted for moneyor clean money.
Concerns with respect to Electoral Bonds:
Despite the fact that the Electoral Bond Scheme works as a deterrent to old under-the-table donations because bonds are issued via cheques with digital paper trails of transactions, many major elements of the scheme raise concerns.
Anonymity: The donor (individual or corporate) or the political party are under no duty to divulge the source of their contributions.
Transparency: It will also be in violation of transparency, which is a key concept in political finance. Companies will no longer be required to disclose the identities of the political parties to which they have donated, leaving shareholders in the dark about their money’s whereabouts.
Other concerns
There is the potential for electoral bonds to become a convenient conduit for black money. In that regard, the following provisions are contentious:
The 7.5 percent cap on corporate donations should be abolished.
Companies are not required to disclose their political contributions in their financial accounts.
The scheme’s objective is harmed by the requirement that businesses be in business for three years before making political contributions. This makes it simple for dying, troubled, or shell corporations to anonymously make a large donation.
The government always knows who the donor is because the bonds are purchased through the State Bank of India (SBI). This knowledge asymmetry has the potential to favour whichever political party is in power at the moment.
The Election Commission of India has requested that the reporting limit (now Rs 20,000) be cut to Rs 2000, but instead, the government has decreased the maximum monetary contribution to Rs 2000.
It might become a convenient avenue for businesses to transfer cash stashed in tax havens to political parties in exchange for a favour or advantage.
Drawbacks of Electoral Bonds
Although the RPA (Representation of People Act 1951) requires political parties to report donations of more than Rs 20,000, there is no law prohibiting them from declaring donations of less than Rs 20,000. However, political parties lack political will and hence do not disclose.
Political parties have consistently failed to submit audited reports to the ECI. Between 2011 and 2015, according to ADR
BJP has delayed the submission on an average by 182 days
Congress by 166 days
NCP by 87 days
Worse, some political parties don’t even bother to file returns. There is scant evidence that action has been taken against those who have filed returns late or not at all.
Political parties can continue to accept funds via check and electronic payments (but will have to file returns to the Income Tax authority)
Against Free & Fair Elections:
Electoral bonds provide no details to the citizens.
The said 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 government in power can leverage this information and disrupt free and fair elections
Crony Capitalism:
The electoral bonds system basically eliminates all pre-existing restrictions on political donations and permits
financially sound firms to finance campaigns, opening the door for crony capitalism.
An economic system known as “crony capitalism” is characterised by intimate, mutually beneficial interactions between
business and political leaders.
Conclusion
Electoral Bonds are a type of financial instrument that can be used to make payments to political parties.
The bonds are available in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakhs, and Rs. 1 crore, with no upper limit.
The State Bank of India is authorised to issue and redeem these bonds, which have a fifteen-day validity period.
