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Why electoral bonds scheme has been challenged in Supreme Court?

  • Published
    12th Oct, 2023
Context:

As per the latest update, Supreme Court has fixed 31 October to hear a bunch of petitions challenging the Centre’s electoral bonds scheme. These pleas question the validity of the electoral bonds scheme as a source of funding for political parties.

Background:
  • The electoral bond scheme was introduced in the Finance Bill, 2017.
  • The Centre notified the electoral bond scheme on 2 January 2018 with the aim of enhancing transparency in political funding.

What are electoral bonds?

  • An electoral bond is a bearer instrument like a promissory note that can be purchased by citizens or entities to donate funds to political parties.
  • Such bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore at select branches of the State Bank of India (SBI).
  • Similar to bank notes, these bonds are payable to the bearer on demand and are interest-free.
  • These bonds are available for purchase for 10-day periods each in the months of January, April, July and October.
  • The Centre can specify an additional period of 30 days in the year of Lok Sabha elections.
  • The political parties can encash such bonds within 15 days of receiving them.

Why the electoral bond scheme has been challenges in Apex Court?

  • Challenges to Electoral Bond Scheme: NGOs and political parties are questioning the scheme's legitimacy, citing unchecked funding and lack of transparency.
  • Amendments and Unlimited Funding: The Centre removed donation limits for companies in the Companies Act, allowing unrestricted political contributions.
    • Also, amendments through Finance Acts in 2016 and 2017 enabled anonymous donations through electoral bonds.
  • Transparency Concerns: Although electoral bonds require bank transfers, the purchaser remains anonymous, obscuring donation sources.
    • Transparency is disputed, with the government insisting that the SBI has access to funding information.
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