Electoral bonds were a financial instrument introduced in India to streamline the funding of political parties, maintaining a balance between transparency and donor anonymity.
Let’s delve into the concept of electoral bonds, discussing their inception, functionality, and the needs they aimed to address.
Electoral bonds functioned as an interest-free bearer instrument akin to a promissory note. These bonds could be purchased by any Indian citizen, company, or institution with valid KYC documents, and then donated to any registered political party that met specific criteria. The identity of the donor was kept confidential, safeguarding them against potential backlash.
Introduced in the Finance Bill of 2017 during the Union Budget by the then Finance Minister, Mr. Arun Jaitley, electoral bonds were a bold move to reform political funding. Classified as a Money Bill, they were launched without extensive parliamentary debate, which was a point of contention. The Reserve Bank of India Act was also amended to facilitate the issuance of these bonds by the State Bank of India.
The primary objective behind the introduction of electoral bonds was to cleanse the political funding system by routing all donations through banking channels, thus ensuring transparency and accountability. It was intended to eliminate the influx of unaccounted money, commonly known as black money, into political funding. By enforcing donations through formal banking mechanisms, it was easier to track and audit political contributions, ostensibly increasing transparency.
Any individual, company, or institution in India could buy electoral bonds after completing KYC procedures. Only registered political parties that secured at least 1% of the votes in the last Lok Sabha or state elections were eligible to redeem these bonds.
The bonds were available in multiple denominations ranging from Rs. 1,000 to Rs. 1 crore, making them accessible to a broad spectrum of donors.
Although banks retained records of buyers, the identities were not disclosed to the receiving political parties or the public, ensuring donor privacy.
Electoral bonds were valid for only 15 days from the date of issuance, after which they had to be redeemed by a political party. Unredeemed bonds contributed their value to the Prime Minister's Relief Fund.
These bonds did not yield any interest, distinguishing them from typical financial investments.
Bonds could only be purchased from specified branches of the State Bank of India, centralizing the transactions and facilitating better regulatory oversight.
Sale periods were strategically set at the beginning of each quarter of the financial year, with additional days provided during election years to accommodate increased funding needs.
Full details of bond transactions were maintained by the banks, although these were not publicly accessible under the scheme.
Political parties were required to disclose the amounts received through electoral bonds to the Election Commission, adding a layer of accountability to the process.
The anonymity provided by electoral bonds was both lauded for protecting donor privacy and criticized for potentially obscuring the sources of political funding, leading to a significant legal debate culminating in their discontinuation in 2024.
The Supreme Court of India eventually declared the electoral bond scheme unconstitutional due to concerns about voter information rights and the potential for quid pro quo arrangements, marking the end of the scheme.
Despite their cessation, electoral bonds had a significant impact on political funding in India, spurring ongoing discussions about the best methods to ensure transparency while protecting donor interests.
Electoral bonds represented a pivotal experiment in political finance, embodying the complex interplay between transparency, donor anonymity, and regulatory oversight. Their legacy continues to influence debates on political funding reforms in India and beyond.
