Context

The Election Commission of India filed an affidavit in the Supreme Court, saying that the introduction of electoral bonds and the removal of the cap will have a “serious impact” on the transparency of political funding.

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• The court is hearing a petition filed by the Association of Democratic Reforms (ADR), challenging the validity of the scheme of electoral bonds.
• Election Commission told the court that it had communicated its concerns about electoral bonds to the Union Ministry of Law and Justice.
• In a situation where contributions received through electoral bonds are not reported, on perusal of the contribution reports of the political parties, it cannot be ascertained whether the political party has taken any donation in violation of provisions under Section 29-B of the Representation of People Act, 1951.
• RPA, 1951 prohibits the political parties from taking donations from government companies and foreign sources.
• Election Commission had proposed an amendment to the Representation of People Act to reduce the limit of anonymous cash donations to Rs 2,000 against the Rs 20,000 at present.
• According to the Commission, the amendments to the Foreign Contribution Regulation Act, 2010, made through the Finance Act, 2016, will allow “unchecked foreign funding” of political parties in India.

What are electoral bonds?

• An electoral bond is designed to be a bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand and free of interest.
• It can be purchased by any citizen of India or a body incorporated in India.
• The bonds will be issued in multiples of ?1,000, ?10,000, ?1 lakh, ?10 lakh and ?1 crore and will be available at specified branches of State Bank of India.
• They can be bought by the donor with a KYC-compliant account. Donors can donate the bonds to their party of choice which can then be cashed in via the party's verified account within 15 days.

What are the other conditions?

• Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India.
• Electoral bond transactions can be made only via this account.
• The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October as specified by the Central Government.
• An additional period of 30 days shall be specified by the Central Government in the year of Lok Sabha elections.
• The electoral bonds will not bear the name of the donor. In essence, the donor and the party details will be available with the bank, but the political party might not be aware of who the donor is.
• The intention is to ensure that all the donations made to a party will be accounted for in the balance sheets without exposing the donor details to the public.
  
  

  Representation of People Act, 1951 It is an act of Parliament of India to provide for: the conduct of election of the Houses of Parliament and to the House or Houses of the Legislature of each State, the qualifications and disqualifications for membership of those Houses, the corrupt practices and other offences at or in connection with such elections and the decision of doubts and disputes arising out of or in connection with such elections.