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What was the need of electoral bonds in India when an entity (individual/company) could have anonymously donated to any political party via electoral trusts? What purpose does it serve which couldn't have been served by the political funding methods which existed before it(basically the 'electoral trusts')?

As per my understanding, before the introduction of electoral bonds, if the public/corporate organisations wanted to donate to a political party, they had 3 pathways:

  1. Direct donation via cash.
  2. Donation via netbanking/cheque/demand draft etc. on which the person/company would have got tax benefits under the sections 80GGB/80GGC respectively.
  3. Electoral trusts.

If the government really was worried about the issue of black money as well as the issue of protecting the interests of the donor, in case he/she wanted to remain anonymous, the government could have simply removed the first method of donation i.e. cash, instead of just reducing the donation amount and could have just kept the remaining 2 methods.

What exactly is the objective behind the introduction of electoral bonds still escapes me because I think it provides nothing new at all!

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The electoral bond is an instrument, a bearer instrument similar to a bank note payable to anyone and free of interest. Unlike the trading market, these bonds can be purchased by anyone and when I mean, anyone, is anyone in India. Foreigners can't access to these bonds. The bond is authorized by the State Bank of India and is available in multiple types: INR 1.000, 10.000, 100.000 and the top is INR 1.000.000.

The bond has 15 days of life and it can be donated to a registered -through the SBI-political party in the state, or, national election, which also has a bank account designated to these bonds. And no, you can't buy things nor trade with these bonds, the only way to use it is donating to a political party. The other thing that is interesting in these bonds is the anonymity, meaning, the bond doesn't have any name on it but was purchased through an authorized bank and therefore is legal.

Why create an electoral bond?

The idea is to fight the black money during elections, avoinding for instance money consequence of illegal activities. According to the electoral law, a person can donate only upto Rs. 2,000/- in cash. To donate more, you'll have to buy the bond and give it to the political party.

Why not just keep using the current method?

Using the bond, you need to show where you money came from. While is possible for anyone to buy these bonds, doesn't mean you go to the bank and buy as much as you can, remember these authorized banks have KYC policies to fulfill. By the time political parties want to cash their bonds, it will take for granted that the money they received was from legal ways.

What are the current issues?

  • The main problem -claimed- is the anonymity part. So, the electoral bond -stated before- can only be purchased through authorized banks, which are obligated to fulfill KYC and anti-laundering money policies, giving some degree of transparency but the problem begins with other Modi's reforms such as eliminate the need of corporations to declare their political contributions.

  • Remember also -before- I said there is no bond available for foreigners? Well, thanks to the 2010's Foreign Contribution Act, which treat contributions by Indian subsidiaries of foreign companies as funding from Indian sources, foreign corporate funding to political parties is legal.

  • The only beneficiary from the electoral bond is currently Modi's administration and his political party, which supports electoral bonds for two political reasons: 1) The ruling party -Modi's party- have in custody more than 95% of the bonds and 2) The biggest corporations in India are their main donors.

Could the electoral bond still being helpful for politics?

Yes, it could but with two major changes:

  1. Make public the source: If Raj bought the bond, let us know he was behind the donation.
  2. Political parties with open books: To success fully, political parties must show funding and expenses. While the bonds helps to prevent the access of black money, open the books will complete the action. Otherwise, is not complete.

These two changes and the bonds have one common issue: identify big donors and their political links.

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    Making the source public is discouraged because then the rest of the parties will know that Raj (or some corporation) didn't donate to them but to their rival instead. This can result in negative consequences for the donor in case one of the other parties (which didn't receive the donation) come to power. – CinCout Dec 26 '18 at 12:21
  • It's a good point, considering that in developing countries, the political fraction is bigger than other countries. However, the alternative is still using it anoynmous and protecting big donors. The alternative is to use pseudonymous donors until INR 1000, up to this, it's public. But again, without public records, it's nonsense the efforts. – nelruk Dec 26 '18 at 15:48
  • I've not accepted this answer as it does not highlight why electoral bonds are necessary when electoral trusts are present. – Vishal Sharma Jan 3 at 5:32

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