Electoral bonds are completely different from the regular bonds (also known as debentures) issued in the Indian market. Regular/ corporate bonds are instruments through which companies borrow funds at a specified/ floating interest rate.
However, no interest is given on the purchase of such electoral bonds. They were announced recently by the finance ministry as an alternative to cash donations to political parties.
Electoral bonds are bearer instruments (bearer instruments refer to instruments like currency notes, which can be transferred by transferring possession to a persion) which can be used to give donations to political parties, by an individual or an entity incorporated in India.
They are generally issued in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 Lakh, Rs. 10 Lakh and Rs. 1 crore.
Who issues Electoral Bonds?
The State Bank of India (SBI) has been designated as the exclusive issuer bank for Electoral Bonds. This means the SBI is the only bank that is allowed to issue electoral bonds and encash them on behalf of political parties.
Electoral Bonds are issued in tranches of 10 days at the beginning of every quarter i.e. first 10 days of January, April, July and October. In the year of Lok Sabha elections, extra 30 days shall be provided.
Which political parties are eligible to receive Electoral Bonds?
Political parties that secure not less than 1% of the total votes during the former Lok Sabha or legislative assembly elections are eligible to receive funds through Electoral Bonds.
How can a donation be made using Electoral Bonds?
A person who wishes to transfer funds to a political party purchases the Electoral Bonds from an authorised branch of SBI. He/ she can then give possession of such bonds to the political party that he/ she wishes to fund.
The political party can immediately encash the electoral bonds by depositing them with their branch at SBI. The banker is responsible for crediting the funds to the political party on the date of deposit itself. No funds shall be credited to a political party’s account in case the bonds are deposited after 15 days from the date of issuance.
What is the validity period of such Electoral Bonds?
The Electoral Bonds have a validity period of 15 days from the date of issuance.
This means that the electoral bonds, once purchased, shall be valid for 15 days from the date of issuance and therefore, must be banked within this period by the political party, to which the donation is being made.
OK, so why was this system of Electoral Bonds started?
Well, for one, to prohibit the flow of cash and black money into politics. The system of Electoral bonds is through the banking channels and a person purchasing them has to make payments through his/ her bank account. The other is anonymity, the identity of the person purchasing the electoral bonds is protected since the bonds do not mention the name of the person purchasing them and the political party is not required to disclose the identity of the person that gave them such bonds.
And, now you know! So what do you think about electoral bonds? Let’s discuss below!
