Abstract:
This research paper aims at exploring the effectiveness and effects of electoral bonds under the context of the Indian political scenario primarily in the models of donating without compromising the identity of partisan donors. While AEBs were launched aiming to increase transparency in political funding and curbing ‘black money’, transparency where chances of quid pro quo deals and compromise of the electoral are Godzilla. Fears for donors anonymity, and impacts on democratic institutions. When one looks at the various types of legal issues encompassing them such as those determined by the Supreme Court, they find that there is a need to tighten legal bodies.
infusing innovation in accounting at the same time guaranteeing anonymity of the donor hence playing the part of the 6th estate in the on going debate on the political funding reforms in India.
Key words:
1. Electoral bonds
2. Transparency
3. Political funding
4. Anonymity
5. Legal challenges
6. Electoral integrity
7. Accountability
Introduction :
In an effort to increase the openness of political funding, India established electoral bonds as financial instruments in 2018. Like promissory notes, these bonds are available in ranging from ₹1,000 to ₹1 crore, and they can be purchased by any Indian citizen or incorporated body. These bonds, which are available at specific State Bank of India branches during government-announced designated periods, can be donated to any political party registered under Section 29A of the Representation of the People Act, 1951 that received at least 1% of the vote in the most recent state or general election. After the bonds are purchased, they can be given to the selected political party, which can pay them within 15 days. The system aims to reduce black money and undisclosed donations by ensuring that all transactions go through banking channels, thereby increasing accountability and encouraging legal contributions. However, the scheme has faced criticism, particularly due to the anonymity of donors, which some argue could lead to greater opacity and corporate influence on politics. Critics also suggest that the ruling party might gain an unfair advantage since the government, through SBI, can access donor identities. Furthermore, the lifting of the corporate donation cap prompts worries about corporate influence over political choices. The Supreme Court of India has been the target of legal and political challenges arguing that the arrangement infringes citizens’ rights to information and hinders transparency. Concerns over possible systemic abuse and a lack of transparency have also been voiced by the Reserve Bank of India and the Election Commission of India.
Research methodology :
This research into electoral bonds in India utilises a theory-driven, sequential, and concurrent mixed-methods design to achieve a richer, holistic understanding of the effects of the bonds on political contributions transparency and democratic functions. The study begins with a detailed analysis of theoretical works, legal papers, government reports, and news coverage as a preparatory step to the assessment of the history of electoral bonds and various stances that can be taken on the subject. The primary data was collected through interviews and questionnaires the respondents are: Academician: Economists, Law experts, Political science experts and research scholars Political commentators and analysts, Legal consultants and analysts, Donors and foreign operatives of the political parties, and a cross section of the populace. To offset the limitations of the above qualitative measures, official government documents, records of the State Bank of India, data provided by the Election Commission, and other sources from financial watchdogs are used for cross-checking the results and for adding historical perspectives.
Interview data and literature reviews are further analyzed through the NVivo software that captures the aspects of electoral bond systems and may be useful in the form of themes and subthemes discovered. Qualitative data is analyzed through reading and reviewing notes, synopses, and surveys while quantitative data, collected from surveys and secondary sources, is analyzed using statistical analysis softwares such as SPSS where descriptive analysis provide an overall view and inferential analysis with techniques like regression analysis provide correlations to the data. In terms of ethical considerations, the study works to protect the participants’ anonymity and their data privacy, while attempting to guard against data access concerns and possible biases stemming from survey data, including the limitations in data access for the study and self-reported data and prospective confounding factors. In conclusion, this methodological approach is designed to provide policy-relevant and unbiased analysis of the objectives, functioning, outcomes, and challenges pertaining to electoral bonds, so that the scholarly findings and recommendations derived from this study can help Indian policy makers, analysts, and the public to better understand electoral finance development and impact, and, thus, work collectively toward assessing political funding transparency and mitigating connected issues in India.
Historical evolution behind electoral bonds :
It is crucial to understand that electoral bond challenges like opacity, corruption, blackmailing, and black money have always been at the center of the logic and historical science of electoral bonds in India. Before the formation of political parties, most of the funds from their supporters were given in cash form which was most of the time unaccounted for and was coming from areas such as shadow economy and other forms of untraceable financial transactions. This climate increased concerns regarding the nature and extent of black money on the governance and especially in relation to the elections through which it became difficult to promote accountability and transparency in political fundraising. But to counter these issues, electoral bonds were introduced in the Indian context in 2018 as a part of a more extensive act of making polity funding more transparent. From the first part of the electoral bond program established by the Indian government, it was argue that one of its aims was aimed at reducing demand for physical cash among political parties by facilitating donations through official banks. These bonds are in the nature of bearer instruments which can be purchased by the Indian residents or entities and can be donated to such parties which are entitled to receive the same. They are seen in various types. Requirements of the system will remain to safeguard the identity of donors while at the same time ensure that there is(traceability of funds back to source through the banking transactions which can undergo through KYC processes. These are some of the primary objectives of electoral bonds: It seeks to ensure that election funding is clean money, no black money and is also a step towards increasing transparency. Because the government wished to remove money that is hidden from politics, or ‘black money,’ they aimed to move the donations into the banking stream, which are white money, or legal funds legally contributed through check. There have been some concerns about the plan for the anonymity of the donors, which some people argue does not erase, but rather extends, the juridical obscurity. Therefore, while the issues of opacity and cronyism still persist in India’s political funding scenario, the concept of electoral bonds, an indication of the government’s commitment towards reform and transparency, goes a long way in addressing problems pertaining to funding in India’s polity.
Impact on political funding transparency :
To address the issues of avoiding reporting cash contributed to the political parties and making political fund raising more transparent, the electoral bonds were created in India. These bonds provide an opportunity to channel funds through official domestic banking system. This plan was designed to curb the influence of black money in the election process by making the financing of political processes more transparent through purchase through bank account which meet the KYC requirements. Increased accountability and less bureaucratic politics process for electoral purposes were expected benefits of this shift from offline money based system of transactions. The impact of transparency has been moderate and different depending on the type of activity. Donors’ identities are provided to the System and, to the extent that the Political parties receiving the donations cannot access the information. Even if the System ensures that the issuing bank, the State Bank of India, holds the donor’s identity records. Criticisms are raised question is whether the general public is aware on the sources of funding of political organizations; giving a sort of ‘shroud’ which may allow the secret or even illegal corporate financing to perpetrate hidden manipulations of politics as they may be. Moreover, since the government has linkages to the donor data through State Bank of India, there are allegations that the plan has tilted towards benefiting the governing political party. There may be a conflict in having such access threaten fair competition in democratic elections; it may trigger the inequality in the political power and fundraising abilities among political parties. In conclusion, the article under analysis has concluded that though political donations became more transparent with the help of electoral bonds in the financial system of India, the possibility of labeling donors and other preferences have raised certain questions about the effectiveness of this method in making political funding more fair and transparent.
Anonymity and Its Implications:
To safeguard the donors from potential retaliations and coercion and for the purpose of promoting an authentic political fund raising through electoral bonds, the identity of the donor is encrypted from the public and the political party scrutiny. Critics have argue that this confidentiality is likely to erode political finance transparency. Critics argue that when donors are not required to reveal their identity, matters concerning corporate or illegal contributions to certain political cause could be secretly funded undermining the credibility of election processes. The matter of justice is also raised by the non-disclosure, especially if the issuance of misleading figures is deliberate, as it may lead to voters’ decisions being made owing to the lack of certain information. In sum, these problematic issues may ease the employment of mailers and make sure that the elections will remain fair, transparent, and free from interference, that is why the balance between the donors and the public’s right to know must be achieved.
Legal and Constitutional Challenges:
These electoral bonds have come before the courts of law and the Indian constitution more often than any other instrument of corruption. Transparency and the right of information remain the two prominent concerns there. The critics argue that in a democracy, the voters have rights, including the right to be informed about the sources of funding of political activities, which is why the anonymous donors’ tactic undermines their rights. As for now, the establishment of electoral bonds was disputed before the Supreme Court of India. Critics argue that in essence the plan can bring about a status of free and fair elections into question by finding ways and means of accepting limitless corporate and unlawful contributions of funds to the political parties. The court has been asked to rule whether electoral bonds conform to electoral process regarding its pillars of integrity, equality, and transparency as provided in the constitution. Additionally, the Indian Election Commission has expressed concerns over the mining of risks inherent in the misuse of electoral bonds and interference in the voting process. These difficulties therefore alert the observer to the multifaceted legal situation regarding electoral bonds: the use of the Indian values of democracy and constitutionalism in formulating an adversarial claim about the optimal means of integrating anonymity for donors with the need for electoral integrity.
Role of the State Bank of India in Electoral Bonds:
For a nation with a billion plus people, India has a very simplistic electoral bond program and crucial to that is the State Bank of India (SBI), which is the only financial entity authorised by the government to issue and redeem these instruments. At some times, SBI is responsible for assisting in the issuing of electoral bonds that are available at designated branches all over the country and denominations of ₹1000 to ₹1 crore. Its one of primary functions is to ensure that Know Your Customer ( ) requirements are complied with. This involves verifying the identity and the eligibility of those who purchase bonds in an attempt to maintain theirlight and reduce instances of misuse. Having bought the electoral bonds they are secured at the SBI and are handed over to the permissible political parties.These electoral bonds have been before the courts of law and the Indian constitution with higher frequency than probably any other instrument used in corruption. Transparency and the right of information are still the two major issues which are dominant there. The critics also opine that since the voters are also legal entities in a democracy, they have some rights and these rights include the right of being informed of the identity of those who are funding political activities; this is why the great unknown donors’ strategy denies the voters their rights. For now the scheme has controversy, the scheme of electoral bonds was challenged at Supreme Court of India. The opponents’ concern is that, in fact, the plan can undermine the free and fair elections’ possibility by looking for ways and means of receiving any sort of contribution including illegally or in an unlimited amount from the corporations. The court has been called upon to determine the extent to which electoral bonds meet the precept of the electoral process with its fundamental principles of integrity, equality, and unfairness as enshrined in the constitution.
Electoral bonds and political party finances:
Electoral bonds may be seen as the beginning of a new opening in India’s political financial landscape given that their introduction established a clear system of legalized and more transparent fundraising for political parties. These bonds have made their debut in the financial year of 2018-19 to enable individuals and companies to give money to political parties through certain ‘mystified’ institution mainly SBI that the party getting the donation does not know who the donor is. Eradicating petty cash is one of the objectives in issuing electoral bonds, as such cash dealings were associated with ‘missing money’ and potential corruption in political funding. In an effort to rid politics of ‘dark money,’ the system aims to enhance financial openness and enabling money to be donated only through banks while aligning with Know Your Customer (KYC) standards. However, there are controversies that are associated with electoral bonds and this is in a respect to their implication to the funding of political functions. Critics argue that the public discovers it difficult to assess the financial backers funding a political party since the rules or laws of the country allow contributors to withhold their identities, making it even difficult for voters to weigh the monetary stakes of politics.This aspect says that openness of the political process may be hampered by the decision, thereby allowing shadowy corporate entities to lobby for policy changes that benefit the affluent givers. In addition, considering that the incumbent party gets data of the donors through SBI and other opposition parties get no such data, arguments have been given that eBay to electoral bonds is uncivilized. This can be a boon for the ruling party in fundraising and may give it an upper hand on rivals in terms of election campaigns. In conclusion, the electoral bonds intended to redesign the fiscal constituency contributions by bringing accountability and eliminating cash dominance in Indian politics have some problems with donors’ anonymity and reasonable political competition.
Media coverage and public discourse:
When it comes to the subject of media discourse and discussion, electoral bonds in the framework of the Indian context, have evoked different opinions and estimations. Thus, while electoral bonds which were initially only applauded as means of increasing the transparency of the system of political financing are now attracting much public, policy, and journalistic attention. Critics argue that, while dark money in politics is defeated by pulling strings at remote corners and providing anonymous funds to political parties, electoral bonds make donations transparent through banking and KYC norms. Some claim that while such measures can enhance the transparency and talk initiated accountability of financial deals, they can actually help to speed up the electoral process, as well. On the other hand, criticism and concern have been raised by the following people depending on the policy they view it as having negative impacts, especially on donor anonymity. They argue that since parties and candidates do not disclose their sources of political funds, one cannot distinguish between an interest that is official or perceived a conflict of interest since the financial influence is veiled from the voting public; hence they claim that political finance is not open.Critics has indicated that the lack of openness that comes with this democracy weakens justice and representation, and leaves room for policy being shaped by faceless corporate entities. The Supreme Court has heard cases that sought to dispute the validity of electoral bonds as well as their compliance with ‘the legal principles and characteristics of the transparency of elections,’ which has been documented by media outlets. Political activism and lobbying for change such as public demonstrations have been witnessed in many countries for the change and openness of the politico-funding system.
Policy Recommendations for Improving the Electoral Bond Scheme:
Enhancing transparency, accountability, and equity in political funding necessitates addressing the following important issues in order to improve the Indian electoral bond scheme:Enhancing transparency, accountability, and equity in political funding necessitates addressing the following important issues in order to improve the Indian electoral bond scheme:
1. Improved Transparency Measures: Develop measures which shall ensure that the identity of individual donors is kept secret for various reasons while at the same time passing the required information about the donors to a third party such as a regulatory agency.
2. Strengthening Regulatory Oversight: Due to restricted market access, grant regulatory agencies like the Indian Election Commission the power to oversee and ensure compliance with the laws governing electoral bonds. We
3. Public Disclosure of Electoral Bond Transactions: Both electoral bonds and party funding were contained in the bill; the following recommendations were made: Requiring political parties to immediately and transparently report every electoral bond transaction. In this way, political finance operations themselves would become more visible to the public, and in this sense, would be exposed to more scrutiny than now.
4. Reducing Corporate Influence: Due to self-interested manipulations by donors, large corporations should not be allowed to dominate political decisions, and thus, corporate donation caps should be put back in place. This action may reduce the chances of vested interests abusing electoral bonds as shown in this generalized structure.
5. Educational Campaigns: Organise awareness programmes for the public for realizing awareness about electoral bonds and their consequences. This would still allow the voters to be full participants in demanding changes to the system that is in place for the election and in coming to a decision on the same.
Through the implementation of these suggestions, electoral bonds would be used effectively in achieving its main goal of increasing political accountability and transparency within the country, as well as fostering democratic values and strengthen voter trust.
Current scenario of electoral bonds in India :
Despite controversies and legal challenges, electoral bonds have significantly impacted political funding, including the recent state elections in May 2024 in Uttar Pradesh, Uttarakhand, Punjab, Goa, and Manipur. These bonds, available in denominations from ₹1,000 to ₹1 crore, were purchased by corporations, businesses, and individuals, providing substantial financial resources to political parties.Critics highlight the anonymity of donors as a major concern, fearing it undermines transparency and allows for potential policy manipulation and election result influence. The Supreme Court of India has twice reviewed the scheme, focusing on constitutional legitimacy and transparency issues, but it remains in use.
Electoral bonds have reshaped political campaign strategies, influencing advertisements and voter outreach, particularly in swing states. While they have become a focal point in discussions about electoral reform and public participation in Indian democracy, the true impact on electoral integrity and democratic institutions continues to be hotly debated.
Conclusion:
Electoral bonds in India continue to spark significant controversy and debate, particularly regarding the policies governing them. These bonds were introduced to reform political funding by replacing opaque methods with a system that maintains donor anonymity. While the intention behind electoral bonds was to eliminate unaccounted cash transactions and reduce the influence of black money in politics, concerns about transparency and accountability persist.The scheme allows individuals and corporations to make lawful financial contributions without adverse repercussions, potentially curbing illicit funding. However, the lack of transparency has raised legal and ethical questions, leading to numerous challenges in the Supreme Court. Although the Court has not deemed the scheme unlawful, it emphasized the need for enhanced checks, balances, and disclosure requirements.
Balancing donor anonymity with the public’s right to know who funds political parties remains a critical issue. There is a pressing need for more rigorous regulations, improved reporting practices, frequent audits, and vigilant monitoring by authorities to ensure the scheme’s integrity.In conclusion, while the effectiveness of electoral bonds in enhancing political accountability and transparency is still uncertain, they represent a significant attempt to reform political financing in India. Ongoing legal cases, media scrutiny, and potential legislative changes will shape the future of electoral bonds, impacting the dynamics of political funding and democracy in the country.
References:
Government of India. (2017). Finance Act, 2017.
Election Commission of India. (2019). “Electoral Bonds and Political Funding.”
Reserve Bank of India. (2018). “Concerns Regarding Electoral Bonds.”
Centre for Policy Research. (2020). “Political Financing and Electoral Bonds in India.”
Supreme Court of India. (2020). “Petitions Challenging the Electoral Bond Scheme.”
Transparency International. (2021). “Global Perspectives on Political Financing.”
Association for Democratic Reforms. (2021). “Impact of Electoral Bonds on Political Funding.”
Media and News Articles:The Hindu, The Indian Express, and The Times of India: “Articles and op-eds on the impact and controversies of electoral bonds.”
Think Tanks and Advocacy Groups:PRS Legislative Research: “Analytical reports and data on electoral bonds.Observer Research Foundation (ORF): Research papers and articles on political funding.”
SUBMITTED BY: TANVI RUKHAYA
OP JINDAL GLOBAL LAW SCHOOL