In News:

• In response to an RTI request, the State Bank of India (SBI) stated that in the 20th phase (April), it sold worth Rs 648.48 crore electoral bonds.
  
  
• What has puzzled observers is why people are donating funds via electoral bonds when there is no election on the horizon.
  
  
• In this context, we will try to understand all about the Electoral Bond Scheme.
  
  

What’s in today’s article:

• Electoral Bond Scheme (Background, about, benefits, criticism, SC on the operation of electoral bonds, way ahead)
  
  

Electoral Bond Scheme:

• Background: Announced in the 2017 Union Budget, the Electoral Bond Scheme (EBS) was notified by the Central government in 2018.
  
  
• About the scheme:
  • Under the scheme, electoral bonds can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India (SBI).
    • An electoral bond is like a promissory note - a legal instrument in which one party promises to pay a sum of money to the other.
      
      
    • The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
      
      
    • There is no limit on the number of bonds an individual or company can purchase.
      
      
    
    
    
  • The citizen can then donate the same to any eligible political party (23 - only those registered under the Representation of the People Act, 1951 and have secured not less than 1% of the votes polled in the last LoK Sabha/State Assembly elections) of his or her choice anonymously.
    • The political party can then encash these bonds through its verified account within 15 days.
      
      
    • The SBI deposits bonds that a political party hasn’t encashed within 15 days into the Prime Minister’s Relief Fund.
      
      
    
    
    
  • Hence, electoral bonds are interest-free bearer instruments that do not carry any information about the buyer or payee and the holder of the instrument (political party) is presumed to be its owner.
    
    
  • Since the introduction of the scheme, political parties have encashed bonds for a total of Rs 9,836 crore from various contributors in 20 rounds.
    
    
  
  
  
• Benefits:
  
  
• Criticism:
  • Anonymity: The Finance Act of 2017 exempted political parties from disclosing details of contribution through electoral bonds with the Election Commission of India (ECI), making the political class even more unaccountable, potentially leading to an influx of black money.
    
    
  • Undue advantage to the ruling government: Anonymity does not apply to the government of the day as it can always access the donor details by demanding the data from the SBI.
    
    
  
  
  
• The Supreme Court of India on the operation of electoral bonds:
  • Two NGOs in India - Common Cause and Association for Democratic Reforms (ADR), have legally challenged the scheme, alleging that the introduction of electoral bonds is distorting democracy in India.
    
    
  • The SC (in its interim order), has asked political parties to reveal details of the donations they received through electoral bonds to the ECI, ensuring some transparency going ahead.
    
    
  • On the other hand, the ECI has been asked to keep all the details in a sealed cover until further orders of the top court.
    
    
  
  
  
• Way ahead:
  • According to ADR, if the scheme is to be continued, the principle of bond donor anonymity must be abandoned.
    
    
  • All political parties that receive donations through Electoral Bonds must declare the total amount of such donations received in the given fiscal year in their Contributions Reports, along with the detailed particulars of the donors, the amount of each such bond and the full particulars of the credit received against each bond.