Electoral bonds: Parties mop up over Rs 10,000 crore since 2018 (UPSC Current Affairs)

Relevance: GS2 - Transparency and accountability;Government policies and interventions for development in various sectors and issues arising out of their design and implementation

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Why in the news?

• According to information available from State Bank of India (SBI), donations to political parties through electoral bonds (EBs) have surpassed the Rs 10,000 crore milestone, with parties receiving an additional Rs 389.5 crore through such bonds in the 21st sale of EBs held between July 1 and 10.
• As a result, since the EB scheme was established in 2018, the total revenue collected by parties has increased to Rs 10,246 crore from various anonymous contributors in 21 rounds.

What are electoral bonds?

• These are a type of debt instrument that donors can purchase from a bank and then provide to a political party to cash in.
• Only an approved person may redeem these by depositing the funds into a designated account held with a bank.
• SBI issuing bonds in denominations of 1,000, 10,000, one lakh, ten lakh, and one crore rupees.
• Donors acquire electoral bonds in an anonymous manner, and they are only valid for 15 days after they are issued.
• The only bank permitted to sell these bonds is SBI.
• The Central Government may specify that the bonds will be offered for sale for 10 days each in the months of January, April, July, and October.
• No Interest is payable on Electoral Bonds under this Scheme
• SBI deposits these into the Prime Minister's Relief Fund if a party hasn't encashed its bonds within 15 days.

Who is eligible to buy electoral bonds?

• As per provisions of the Scheme, Electoral Bonds may be purchased by a person (as defined in item No. 2 (d) of Gazette Notification), who is a citizen of India or incorporated or established in India.
• An individual may purchase Electoral Bonds alone or in a group with other individuals.
• To be eligible to receive Electoral Bonds, a political party must be registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951), and it must have won at least 1% of the votes cast in the most recent general election for the House of People or the State's Legislative Assembly.
• A qualifying political party may only redeem the electoral bonds through a bank account with the authorised bank.

What are the criticisms against these bonds?

• The electoral bonds programme is mostly criticised for doing the exact opposite of what it was intended to do, which was to increase election financial transparency.
• Anonymity : For instance, some contend that electoral bonds' anonymity only applies to the general people and the opposing parties.
• Such bonds are sold through a government-owned bank (SBI), which gives the government access to information about the financiers of its adversaries.
• Highest Denominations : Election-related bonds were introduced with the goal of facilitating easy funding of political parties by the general public, however more than 90% of the bonds issued have been of the highest denomination (Rs 1 crore).
• Corporate Funding :Additionally, there was a limit on how much a business may donate to a political party prior to the announcement of the electoral bonds scheme: 7.5% of the average net profits of a corporation over the previous three years.
• However, the government removed this restriction after amending the Companies Act, according to critics, allowing corporate India to get unrestricted funds.