Daily News Analysis

Supreme Court flags concern over misuse of electoral bonds  

25th March, 2021 Polity

Context: The Supreme Court flagged its concern that political parties could misuse crores of rupees received as donations through electoral bonds to bankroll violent protests or even terror.


Issue raised by Supreme Court: Suppose there is a political party, which wants to buy electoral bonds and finance a protest. What is the control of the government on how the money is put to use?


What are electoral bonds?

  • Announced in the 2017 Union Budget, electoral bonds are interest-free bearer instruments used to donate money anonymously to political parties.
  • A bearer instrument does not carry any information about the buyer or payee and the holder of the instrument (which is the political party) is presumed to be its owner.
  • The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and the State Bank of India (SBI) is the only bank authorised to sell them.
  • Donors can purchase and subsequently donate the bonds to their party of choice, which the party can then cash through its verified account within 15 days.
  • There is no limit on the number of bonds an individual or company can purchase. SBI deposits bonds that a political party hasn’t enchased within 15 days into the Prime Minister’s Relief Fund.


Reason for opposition of electoral bonds:

  • The anonymity provided to donors donating electoral bonds is the point of contention here.
  • Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.
  • They don’t have to disclose details of those contributing by way of electoral bonds in their contribution reports filed mandatorily with the Election Commission every year.
  • This means the voters will not know which individual, company, or organisation has funded which party, and to what extent.


Usage of Electoral Bonds:

  • In less than three years of their introduction, by virtue of the anonymity they offer to donors, electoral bonds have become the most popular route of donation.
  • The Bharatiya Janata Party (BJP) is the biggest beneficiary of this scheme. In the years 2017-18 and 2018-19, political parties received a total of Rs 2,760.20 crore from electoral bonds, of which Rs 1,660.89 cr or 60.17% was received by the BJP alone.


Election Commission’s stand on electoral bonds: The Election Commission, in its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in May 2017, had objected to the amendments in the Representation of the People (RP) Act, which exempt political parties from disclosing donations received through electoral bonds. It described the move as a “retrograde step”.