What are Electoral Bonds?

About Electoral Bonds:

• The electoral bond scheme was launched by the Union government in 2018.
• What is it? It is a bearer instrument, like a promissory note that can be bought by any Indian citizen or company incorporated in India.
• The citizen or corporate can then donate the same to any eligible political party of his/her choice.
• The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
• An individual or party is allowed to purchase these bonds digitally or through cheque.
• Working:
  • EBs are issued/purchased for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1,00,000, Rs 10,00,000 and Rs 1,00,00,000.
  • The electoral bonds are available for purchase for 10 days at the beginning of every quarter.
  • SBI is the only bank authorized to sell these bonds.
  • Anonymous cash donations were capped at Rs 2,000.
  • EBs have a life of only 15 days during which it can be used for making donations to political parties.
  • Eligibility: Only political parties registered under Section 29A of the Representation of thePeople Act, 1951 and which secured not less than 1% of votes polled in the last general election to the House of the People or the Legislative Assembly of the State, are eligible to receive electoral bonds.
  • The bond can be encashed by an eligible political party only through a designated bank account with the authorized bank.
  • The political parties have to disclose the amount to the Election Commission.
  • The electoral bonds will not bear the name of the donor.

Q1) What is a bond?

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.

Source: Electoral bond sales for 10 days from April 3

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