What is an Electoral Bond?

On January 2, 2018, the government had notified the Electoral Bond Scheme 2018. It was touted as an alternative to cash donations and to ensure transparency in political funding.

As per the provisions of the scheme, electoral bonds may be purchased by an Indian citizen or a company incorporated or established in India.

Only political parties registered under Section 29A of the Representation of the Peoples Act, 1951 and has secured no less than one per cent votes in the last Lok Sabha elections are eligible to receive electoral bonds.

The electoral accounts are issued by the State Bank of India (SBI). The electoral bonds can be purchased in the months of January, April, July and October.

Political parties are allotted a verified account by the Election Commission and all the electoral bond transactions are done through this account only.

The donors can buy these electoral bonds and transfer them into the accounts of the political parties as a donation. The electoral bonds are available in denominations from Rs 1,000 to Rs 1 crore.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through a bank account with the authorised bank within that period only.

Every donor has to provide his/her KYC detail to the banks to purchase the electoral bonds. The names of the donors are kept confidential.

An electoral bond can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen or corporation can then donate the same to any eligible political party of his/her choice. The bonds are similar to banknotes that are payable to the bearer on demand and are free of interest. An individual or party will be allowed to purchase these bonds digitally or through cheque.

The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018, the government notified the Electoral Bond Scheme 2018.

The bonds will be issued in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore (the range of a bond is between Rs 1,000 to Rs 1 crore). These will be available at some branches of SBI. A donor with a KYC-compliant account can purchase the bonds and can then donate them to the party or individual of their choice. Now, the receiver can encash the bonds through the party's verified account. The electoral bond will be valid only for fifteen days.   The 29 specified SBI branches are in cities such as New Delhi, Gandhinagar, Chandigarh, Bengaluru, Bhopal, Mumbai, Jaipur, Lucknow, Chennai, Kolkata and Guwahati.