Electoral Bonds-UPSC General Studies Notes

Introduction:

• Electoral bonds are a financial instrument introduced by the Government of India in 2018 aimed at making political funding more transparent and accountable.
• While proponents argue that electoral bonds can help reduce corruption and increase transparency in political funding, critics raise concerns about potential loopholes and challenges to democratic principles.

Key Features of Electoral Bonds:

1. Anonymity:
   • Electoral bonds allow individuals and corporate entities to donate funds to political parties anonymously.
   • Donors can purchase electoral bonds from authorized banks and donate them to the political party of their choice without disclosing their identity.
2. Legality and Regulation:
   • Electoral bonds are legal financial instruments regulated by the Reserve Bank of India (RBI) and governed by the Electoral Bond Scheme introduced by the government.
   • They are issued in specified denominations and can only be encashed by eligible political parties within a designated period.
3. Transparency and Accountability:
   • Electoral bonds are intended to bring transparency to political funding by channeling donations through the banking system.
   • Political parties are required to declare the amount of electoral bonds received in their audited accounts, increasing accountability in the utilization of funds.
4. Exclusivity of Use:
   • Electoral bonds can only be used for funding recognized political parties registered under the Representation of the People Act, 1951.
   • They cannot be encashed by individuals or entities other than political parties, ensuring that funds are directed exclusively towards political activities.
5. Privacy and Security:
   • Electoral bonds incorporate security features to prevent counterfeiting and ensure the integrity of transactions.
   • The anonymity of donors is protected to safeguard them from potential reprisals or harassment for their political affiliations.

Implications and Controversies:

1. Lack of Transparency:
   • Critics argue that electoral bonds fail to address the fundamental issue of transparency in political funding since the identity of donors remains undisclosed.
   • Without disclosure requirements, electoral bonds may facilitate covert funding by vested interests, undermining public accountability and trust in the political process.
2. Potential for Money Laundering and Corruption:
   • The anonymity afforded by electoral bonds raises concerns about the potential for money laundering and illicit funds entering the political system.
   • Critics argue that the lack of transparency makes it difficult to track the source of funds and prevent corruption in political decision-making.
3. Unequal Access to Funding:
   • Electoral bonds may exacerbate inequalities in political funding, as they are primarily accessible to affluent individuals and corporate entities.
   • Small and regional parties, which rely heavily on grassroots support, may be disadvantaged compared to well-funded national parties.
4. Democratic Principles and Accountability:
   • Critics contend that electoral bonds undermine democratic principles of transparency, accountability, and equality in political participation.
   • The lack of disclosure requirements weakens public oversight of political funding and may erode trust in democratic institutions.
5. Legal Challenges and Scrutiny:
   • Electoral bonds have faced legal challenges, with the Supreme Court of India hearing petitions challenging their constitutionality and transparency.
   • The court has raised concerns about the potential misuse of electoral bonds and their impact on electoral integrity and democratic norms.

Conclusion:

• Electoral bonds represent a significant initiative aimed at reforming political funding in India and increasing transparency in the electoral process.
• While proponents view electoral bonds as a step towards cleaner politics, critics raise valid concerns about their impact on transparency, accountability, and democratic principles.
• Addressing these concerns requires careful scrutiny, robust regulatory mechanisms, and broader reforms to ensure that electoral funding promotes fairness, integrity, and public trust in the democratic process.