Electoral Bonds – What is it? All you need to know about it is here!

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Over a period of three days, arguments concerning the voters’ right to information versus the donors’ right to confidentiality were presented before a Constitution Bench led by Chief Justice of India (CJI) D.Y. Chandrachud, which on November 2 reserved its judgment on petitions contesting the legality of the electoral bonds scheme.

Electoral Bonds

Comparable to a financial instrument used to donate to political parties is an electoral bond. The petitioners contend on november 2 that the Rajya Sabha’s scrutiny was circumvented by introducing the program through the Finance Acts. Furthermore, the petitioner ADR has applied for a suspension of the program on the following grounds:

  • The political party in charge of the Union Government has benefited greatly from almost all donations made through electoral bonds.
  • The most common bond denominations are 1 million and 1 crore. This implies that companies, who gain anonymity under the arrangement, are the network’s main users rather than private citizens.
  • Senior counsel Vijay Hansaria, cited by the legal website, argued on behalf of the petitioners, claiming that the plan denigrates openness and encourages opaqueness.
  • He went on to say that the Companies Act, 2013’s paragraph 3A to Section 182 does not need information on the amount provided or the party to whom it was given.
  • Justice Khanna responded by saying that even if it is erased, one must still report the required payment amount.
  • Citing ADR data on electoral trust numbers, Hansaria stated, “There are 18 electoral trusts that have contributed ₹49 crore,” and added that the Election Commission had access to the data.

Electoral Bonds Scheme overview 

Electronic bonds scheme in which any unbroken Hindu family, business entity, or recognized agency in India may issue electoral bonds by contributing money to the political parties of their choosing that are listed as qualified for the campaign.

  • Corporate bonds are issued by RBI-notified banks like State Bank of India (SBI) and come in the following denominations: ₹1000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹1,00,00,000. Electoral bonds, regardless of denomination, are good for 15 days from the day of issuance.
  • The electoral bonds that the general public or businesses issue are given to the political parties. The political parties intend to submit reports on the total amount of electoral bonds they have been given to the election commission.
  • Nearly 90% of all electoral bonds sold to date have come from five cities: Mumbai, Kolkata, Hyderabad, New Delhi, and Chennai. Mumbai has contributed the most, with 26.16% of all bonds sold.
  • Though dubbed the IT center of India, Bengaluru, the capital of Karnataka, which is headed for elections, accounted for just over 2 percent of total sales.
  • With 64.55% of all electoral bonds redeemed to date being encashed in the nation’s capital, the State Bank of India (SBI) branch in New Delhi is the most popular option when it comes to bond redemption.

Electoral Bonds

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Election-related Bonds Flexibility 

In the electoral bond flexibility, it will violate transparency, which is a cornerstone of political fundraising. Shareholders won’t be able to track where their money is going as companies won’t be required to disclose the names of the political parties they give to. That is why the following clauses are debatable:

  • Eliminating the corporate donation ceiling of 7.5%.
  • There is no requirement for businesses to disclose their political contributions in their profit and loss reports.
  • The objective of the system is undermined by the restriction that corporations must be in operation for three years prior to making political donations. This makes it simple for failing, distressed, or shell businesses to provide as much money as they want anonymously.

Given that the bonds are purchased via the State Bank of India (SBI), the identity of the donor is always known to the government. This knowledge asymmetry poses a threat to favor the political party in power at the moment.

Electoral Bonds Attracted Criticism

  • Anonymity

Opponents contend that electoral bonds’ anonymity is limited to the general public and opposing parties. By selling the bonds through a government-owned bank (SBI), the government may more easily identify the precise source of money for its adversaries.

  • Unfair advantage

 It gives the current government the ability to harass large corporations for failing to support the governing party or to demand money from them, giving the party in power an unfair advantage. Over 75% of all electoral bonds have been awarded to the party in control at the center.

  • Higher denominations

Allowing the general public to readily support political parties of their choosing was one of the justifications for the introduction of electoral bonds; nonetheless, over 90% of the bonds have been of the highest denomination.

  • Cap on donation

A corporation may only give a maximum of 7.5% of its average net income over the previous three years to a political party prior to the announcement of the electoral bonds program. Electoral bonds can now be bought by dummy firms or even by loss-making businesses.

  • Black Money

Despite uncertainties over the identity or location of its true owners, any foreign corporation established in India is permitted by the revised Companies Act to donate to political parties through bonds.

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