NEW DELHI: The State Bank of India (SBI), the country’s largest lender, recently provided the details of all electoral bonds sold from 2019 to 2024 to the Election Commission of India (ECI), which is now being published on its website in a phased manner. In compliance with the Supreme Court’s directive, SBI shared the information with the poll panel on March 12 and presented the affidavit about the same with the apex court on March 13. Importantly, the top court had given the ECI time till March 15 to upload the data on its website. The electoral body has uploaded the ‘Disclosure of Electoral Bonds’ submitted by SBI into two sections on “as is where is basis”.

What Are Electoral Bonds? 

Introduced in 2017, electoral bonds allowed individuals and corporate groups to donate unlimited amounts of money to any political party anonymously. Electoral bonds, under the electoral bond scheme, were purchased by donors in fixed denominations from SBI and handed over to any political party that could cash them. The bonds did not require the beneficiary political parties to disclose the name of the donor to anyone, even the Election Commission of India (ECI). 

Electoral Bonds In Political Funding

Electoral bonds are a relatively new concept in the realm of political funding in India. Introduced in 2017, electoral bonds enabled individuals and corporate groups to donate unlimited amounts of money to any political party anonymously. Until a landmark decision by the Supreme Court in mid-February to scrap the seven-year-old election funding system, just weeks before Lok Sabha elections due in April-May this year, the bonds were purchased by donors in fixed denominations from State Bank of India (SBI) and handed over to any political party, which could cash them using a bank account. The bonds did not require the beneficiary political parties to disclose the name of the donor to anyone, even the Election Commission of India (ECI). 

As per the electoral bond scheme, an electoral bond was issued in the nature of a promissory note, which was bearer in character. A bearer instrument does not carry the name of the buyer or payee, hence no ownership information is recorded, and the holder of the instrument is presumed to be its owner, according to the Association for Democratic Reforms (ADR).

Electoral bonds are instruments/securities that are used to donate funds to political parties. Electoral Bonds may be purchased by a person who is a citizen of India or incorporated or established in India. 

Who Can Buy Electoral Bonds?

A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals. 

Who Can Receive Funding Through Electoral Bonds?

Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the Electoral Bonds. 

How To Encash Electoral Bonds?

The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.

Which Bank Can Issue And Encash Electoral Bonds?

The Government of India has authorised the State Bank of India (SBI), in the XXIX Phase of sale, to issue and encash Electoral Bonds through its 29 Authorised Branches (as per list below) w.e.f. 06.11.2023 to 20.11.2023.4 Nov 2023

What Is The Validity Period For An Electoral Bond?

The bond shall be valid for fifteen calendar days from the date of issue and no payment shall be made to any payee Political Party if the Electoral Bond is deposited after the expiry of the validity period.  The Electoral Bond deposited by an eligible Political Party in its account shall be credited on the same day.

How Do Electoral Bonds Work?

These bonds can be purchased in denominations of Rs 1000 from SBI branches during certain periods notified by the government. The political parties can then encash these bonds through their designated accounts within a specified period.

Who Benefits From Electoral Bonds?

The political parties receive the electoral bonds issued by the public or corporations. The political parties expect to approach the electoral commission to file returns on the total electoral bonds they have received.

How To Buy Electoral Bonds?

A citizen of India or a body incorporated in India will be eligible to purchase the bond. 2. Electoral bond would be issued/purchased for any value, in multiples of `1,000, `10,000, `1,00,000, `10,00,000 and `1,00,00,000 from the specified branches of the State Bank of India (SBI). 

Are Electoral Bonds Tax-Free?

The electoral bonds made by individuals or entities were tax-exempt under Section 80GG and Section 80GGB under the Income Tax Act, 1961. Political parties could accept the donations as per the provisions of Section 13A of the Income Tax Act.

Why Electoral Bonds Are Issued?

Electoral bonds were introduced in India through the Finance Act, 2017. The government claimed that these bonds would promote transparency in political funding by channeling donations through banking channels. However, critics raised concerns about the lack of transparency regarding the source of these funds.

Who Can Accept Electoral Bonds?

Within a span of 15 days of issuance, these electoral bonds can be redeemed in the designated account of a legally registered political party under the Representation of the People Act, 1951 (u/s 29A) which got at least 1% of the votes in the last election.

Electoral Bonds Vs Electoral Trusts?

Electoral Bonds, now under challenge before the Supreme Court, have become the primary route of political funding since they were launched in 2018. The key difference between the Trusts and Bonds is in the degrees of transparency they offer, and the Bonds Scheme’s focus on the anonymity of donors.

Do Electoral Bonds Come Under RTI?

In a unanimous verdict, a Constitution bench of the Supreme Court said the electoral bonds scheme, due to its anonymous nature, was violative of the right to information and thus affected free speech and expression under Article 19(1)(a) of the Constitution. The Supreme Court said while the privacy of donors was important, “transparency in political funding cannot be achieved by granting absolute exemptions”. “Information about funding of political parties is essential for the effective exercise of the choice of voting,” the CJI said.

The Supreme Court noted that under the electoral bonds scheme, only the ruling party would have the identity of the donors as the State Bank of India, which issues the bonds, was controlled by the Centre. So far, since the details of donors are exempt from RTI, political parties have only provided the total amount of donations received through electoral bonds every financial year in their account statements to the Election Commission.

Since January 2018, when the electoral bonds scheme was notified, the only details received from the SBI through RTI replies have been the total number of bonds sold and encashed over the years. The Supreme Court said RTI could only be restricted based on Article 19(2), which speaks of the reasonable restrictions on freedom of speech and expression. The court said it does not include curbing black money as a restriction.

What Are The Concerns Regarding Electoral Bonds?

While the government had touted electoral bonds as a mechanism to enhance transparency in political funding, critics argued that the lack of disclosure regarding the identity of donors posed a threat to the democratic process.  They argued that without knowing the source of these funds, there was potential for corruption and undue influence. In light of the concerns raised about electoral bonds, there were calls for reforms to ensure greater transparency and accountability in political funding. Some had suggested the need for stricter regulations and disclosures to prevent any misuse of these instruments. 

How Electoral Bonds Impact Political Funding?

The introduction of electoral bonds had a significant impact on the way political parties received donations. By providing a legal route for contributions, these bonds had become a preferred mode of donation for many individuals and entities looking to support political causes.

As per the electoral bond scheme, an electoral bond was issued in the nature of a promissory note, which was bearer in character. A bearer instrument is one which does not carry the name of the buyer or payee, no ownership information is recorded and the holder of the instrument is presumed to be its owner, according to the Association for Democratic Reforms (ADR).

How Will Political Funding Work Now?

Parties are still able to collect donations directly from individuals and companies, within the limitations on value and anonymity. Donors can still contribute to parties through to entities called electoral trusts, which are that bodies collate funds and distribute them. The trusts have to name the donors and the parties have to say how much in total they received from these trusts, though the disclosures do not make a direct link between each donor and a party. Critics say parties can still break larger donations into smaller chunks of less than Rs 20,000 to mask their donors and pay for things in cash to circumvent election expenditure limits.

How Much BJP And Other Parties Received?

The Bharatiya Janata Party encashed electoral bonds worth Rs 6060.5 crore – the highest among all political parties –  between April 12, 2019 and January 24, 2024. In the period, BJP’s share in the total bonds encashed was over 47.5%. The All India Trinamool Congress received Rs 1,609.50 crore (12.6%) via this route followed by the Congress Rs 1,421.9 crore (11.1%), the second and third biggest parties in terms of encashment in the period.