Will Electoral Bonds Ring in ‘Financial Opacity’?

“Corporate entities can now funnel unlimited amounts to a political party through electoral bonds, anonymously.”

The government has announced the second phase of the Electoral Bond scheme.

(Photo: The Quint/Rhythum Seth)

On Wednesday, 28 March, the government announced the second phase of the Electoral Bond scheme – according to which, bonds will be available at notified branches of the State Bank of India (SBI) between 2 and 10 April.

How would these bonds help? Well, according to the Finance Ministry,

These bonds will be valid for 15 days from the date of issue and no payment shall be made to any payee political party if the bond is deposited after expiry of the validity period.

Finance Ministry Release

The bonds can be bought by any any donor with a KYC compliant account.

This form of electoral reform has been introduced, the government claims, to help legitimise financial transparency.

However, there are various problems with that scheme as several commentators have pointed out.

Pavan Varma, in an op-ed for The Times of India on 31 March, expresses concern over the recent “reform” and the fact that neither the name of the donor nor the beneficiary party will be revealed, while the value of donations can also be unlimited.

...Even loss-making companies or shell companies can be used to purchase electoral bonds. Essentially, then, corporate entities – and individuals – can now funnel unlimited amounts to a political party through electoral bonds, anonymously.

Pavan Varma, <i>The Times of India</i>

The Problem With Non-Serialised Bonds

The Election Commission had made the proposal to reduce the financial ceiling of anonymous donations from Rs 20,000 to Rs 2,000 – but even that, as Varma points out, is eligible to misuse. Parties can simply claim that they have received multiple donations of Rs 2,000 from various donors instead of one large sum from one donor!

Moreover – as Varma points out – the RPA Act has been amended, such that political parties will no longer have to inform the EC of any donations above Rs 2,000 if those donations are made through electoral bonds.

The result is complete financial opacity: EC cannot name the donors, and the IT department, even if questioned under the RTI Act, can claim confidentiality granted to assessees.

Pavan Varma, <i><a href="https://blogs.timesofindia.indiatimes.com/toi-edit-page/nourishing-the-black-economy-electoral-bonds-and-fcra-amendments-pave-the-way-for-unaccounted-political-funding/">The Times of India</a></i>

Another problem with the electoral bonds was pointed out by The Quint in an exclusive report, where it found that while the bond has space to mention the date of issue and amount, it is not serialised. With no serial number, it will be virtually impossible to track where the money promised in the electoral bonds ends up.

Also, while the SBI will have full knowledge of which political party is receiving how much money (since the party will have to submit its KYC details), it will not know the identity of the donor because the bonds will be anonymous and will have no serial number to verify where they land up.

As Varma himself points out, the US and UK have recently tightened the disclosure rules – but,

By contrast, in India, the world’s largest democracy, electoral ‘reform’ has legitimised financial opacity.

Pavan Varma, <i><a href="https://blogs.timesofindia.indiatimes.com/toi-edit-page/nourishing-the-black-economy-electoral-bonds-and-fcra-amendments-pave-the-way-for-unaccounted-political-funding/">The Times of India</a></i>