What is an electoral bond?
An electoral bond is a non-redeemable debt instrument. It is a bearer banking instrument to be used for funding eligible parties. An eligible political party is one which is registered under the constitution and has secured not less than 1% of the votes polled in the last general election — parliament or assembly.
Who are eligible to invest in such bonds and donate to political parties?
These rupee-denominated bonds can be purchased in Indian currency by any Indian citizen or trust, like the Hindu Undivided Family or a registered company. These bonds are issued at the face value of Rs 1,000 and multiples.
How does the scheme function?
The only issuing authority of such bonds is the State Bank of India. The bond holders and the beneficiary party need to have an account with the bank. Those who do not have the account can pay the bank directly. The donor, who buys the bonds, will pay the money into his SBI account. The money is then transferred to the beneficiary party’s account as indicated by the donor within 15 days of the issue. This transaction remains the same even in cases where the donor does not have a bank account with SBI.
Is the donor identity protected?
While the electoral bonds do not have the name of the donor or the receiving political party, the bond issuing authority, the State Bank of India says that all KYC — know your customer — norms that are applicable to general bonds will also be applicable to such bonds. Besides, it can also ask for additional information if it feels the need. Some experts argue that this clause may not help protect donor identity as enforcement agencies such as the income tax department could ask for investor details.
How much money has been mobilised through this route?
Though there is no official information in the public domain, reports suggest that SBI has sold bonds worth Rs 1,716 crore in January and March this year against the Rs 1,056 crore of bonds sold in six months in 2018. But a national election is estimated to cost Rs 30,000 crore or even more.