The Supreme Court of India flagged the possibility of misuse of money received by political parties through electoral bonds for ulterior objects like funding terror or violent protests.

  • The Supreme Court also asked the central government whether there is any “control” over how these donations were used by political parties.

What is Electoral Bond?

  • IT is a financial instrument for making donations to political parties.
  • The Electoral bonds are issued in multiples of Rupees 1,000, Rupees 10,000, Rupees 1 lakh, Rupees 10 lakh and Rupees 1 crore without any maximum limit.
  • SBI (State Bank of India) is authorised to issue and encash these bonds, which are valid for 15-days from the date of issuance.
  • Electoral bonds are redeemable in the designated account of a registered political party.
  • These bonds are available for purchase by any person (who is a citizen of India or incorporated or established in India) for a period of 10-days each in the months of January, April, July and October as may be specified by the Union Government.
    • A person being an individual can buy bonds, either singly or jointly with other individuals.
    • Donor’s name is not mentioned on the bond.

Points To Note

  • Backdrop
    • The Electoral Bond Scheme acts as a check against traditional under-the-table donations as it insists on cheque and digital paper trails of transactions, however, several key provisions of the scheme make it highly controversial.
  • Misuse of Electoral Bonds as Pointed Out in the SC
    • Anonymity: Neither the donor (who could be an individual or a corporate) nor the political party is obligated to reveal whom the donation comes from.
    • Asymmetrically Opaque: Because the bonds are purchased through the State Bank of India, the central government is always in a position to know who the donor is.
      • This asymmetry of information threatens to colour the process in favour of whichever political party is ruling at the time.
    • Chanel of Blackmoney: Elimination of a cap of 7.5 per cent on corporate donations, elimination of requirement to reveal political contributions in profit and loss statements and also the elimination of the provision that a corporation must be three years in existence, undercuts the intent of the scheme.
      • A shell company can donate an unlimited amount anonymously to a political party giving it a convenient channel for business to round-trip its cash parked in tax havens for a favour or advantage granted in return for something.
  • Government’s Defence
    • Conditions for Electoral Bonds: Only parties registered under the Representation of the People Act of 1951 could receive donations through electoral bonds, and they also should not have secured less than 1 per cent of the votes polled in the previous elections.
    • To Take on the Menace of Black Money in Politics: Only white money is involved in the Bonds as the amounts are paid only through cheque or demand draft.
      • KYC norms are also followed.
    • Election Commision of India’s Support: Election Commision was not opposed to the bonds but was only concerned about the aspect of anonymity.
      • It also urged the court not to stay the bonds and said the scheme is one step forward compared to the old system of cash funding, which was unaccountable.

Ahead

  • There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.
  • It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.
  • Voters can also help bring in substantial changes by demanding awareness campaigns. If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher.

Supreme Court Electoral Bonds Won’t Be Stopped Supreme Court Electoral Bonds Won’t Be Stopped