Explained: What are electoral bonds? Understanding their meaning, purpose, latest updates, and key information

PTC News Desk: The electoral bond scheme, introduced in 2017, marked a significant departure in India's political funding landscape. This scheme allowed individuals and corporate entities to contribute unlimited funds to political parties anonymously. Operated through fixed denominations, these bonds were purchased from the State Bank of India (SBI) and subsequently handed over to political parties. The recipient parties could encash these bonds through their bank accounts, with no obligation to disclose the identity of the donor, not even to the Election Commission of India (ECI).

Electoral bonds, functioning as promissory notes, were bearer instruments devoid of any buyer or payee information. This bearer characteristic implied that no ownership details were recorded, and the holder of the bond was presumed to be its rightful owner, as outlined by the Association for Democratic Reforms (ADR).

However, in mid-February, the Supreme Court rendered a landmark decision to dismantle the seven-year-old electoral funding system just weeks before the upcoming Lok Sabha Elections scheduled for April-May. This decision heralded an end to the electoral bond scheme, sparking debates about the ramifications of such a move.

Given the inherent opacity of electoral bonds and the concerns they raised regarding transparency and accountability in political funding, there were widespread calls for reforms. Many advocated for stricter regulations and enhanced disclosures to curb potential misuse of these instruments and ensure a more transparent electoral financing framework.

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Here's an in-depth look at the intricacies surrounding electoral bonds:

1. Anonymity: Electoral bonds provided a cloak of anonymity to donors, safeguarding their identity throughout the donation process and ensuring impartiality in political funding.

2. Legal Framework: Enacted through the Finance Act, 2017, electoral bonds aimed to foster transparency by directing contributions through banking channels. However, concerns lingered regarding the opacity surrounding the origins of these funds.

3. Eligible Parties: Only political parties registered under Section 29A of the Representation of the People Act, 1951, securing at least one percent of the votes in the last general election, were authorised to receive electoral bonds.

4. Funding Process: Parties eligible to receive funds through bonds were required to encash them within a stipulated timeframe through designated bank accounts. Failure to do so within 15 days resulted in the donation being redirected to the Prime Minister's Relief Fund.

5. Denominations: Electoral bonds were available in varying denominations, ranging from Rs 1,000 to Rs 1 crore.

6. Availability: Donors could procure electoral bonds from specified branches of authorised banks during designated periods, occurring four times a year and extending to 30 days during general election years.

7. Validity: Notably, electoral bonds had a limited validity of 15 days from the date of issuance.

8. Transparency Concerns: Despite government assertions of enhancing transparency, critics voiced apprehensions over the anonymity of donors, citing potential threats to the democratic process and susceptibility to corruption.

9. Impact on Political Funding: The advent of electoral bonds reshaped the landscape of political donations, offering a legitimate avenue for contributions and becoming the preferred choice for many individuals and entities supporting political causes.

10. Future of Political Funding: While parties still accept donations directly, restrictions on value and anonymity remain in place. Additionally, electoral trusts serve as conduits for donations, albeit with disclosures of donor names. Critics highlight loopholes such as breaking large donations into smaller sums or using cash payments to bypass expenditure limits.

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(Inputs from agencies)

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