What Are Electoral Bonds And Who Can Buy Them?

What?

On June 30, the Ministry of Finance announced the latest tranche of its quarterly Electoral Bonds Scheme to fund political parties. The scheme is currently active, and you can buy these bonds through July 12.  

The scheme enables individuals, companies, firms, HUFs or trusts to buy nameless promissory notes (the ‘electoral bond' itself) and send them across to a political party of their choice. These parties may then redeem these bonds without knowing who the donor is. 

If you're considering purchasing these bonds, you can only do so at designated branches of the State Bank of India. There are 29 such branches across India. You can find the list here. 

How?

A donor will have to clear some stringent Know-Your-Customer norms and bureaucracy. At the designated branch, a donor will need an application form, KYC documents like proof of identity, proof of citizenship and a pay-in slip to make a deposit.  

While you must purchase the bond by the deadline, the bond itself is valid for 15 days from the date of issue. The political party of your choice must redeem the bond within this window in a designated bank account that they have with SBI. 

Some fine print you need to know before you consider purchasing it:

• You can only buy them in multiples of ₹1,000, ₹10,000, ₹1,00,000, ₹10,00,000, or ₹1,00,00,000 (one thousand, ten thousand, one lakh, ten lakhs or one crore, in that order)
• The minimum donation is ₹1,000 and there is no upper limit
• No refunds in case you change your mind. Though your donation will be refunded if your KYC does not check out or your funds are not received towards the bond before the deadline
• You may make a deposit to SBI electronically or through cheque or demand draft

What are the issues of transparency? 

The clandestine nature of these bonds has attracted their fair share of controversy since their introduction in 2018, including a slew of challenges in court, citing issues of transparency and threat to democracy. The structure of the bond itself means that little is known of where this money is flowing. 

However, in a first in 2021, an electoral trust declared that it had donated ₹3 crores. Though the destination of these funds was not revealed. In the same year, the Supreme Court ruled that the scheme itself would not be stayed.