RTI Reveals Gaping Holes in Electoral Bonds Scheme; SBI Unable to Monitor

The response to an RTI application shows that the State Bank of India is unable to verify the eligibility of political parties who receive funds through electoral bonds. Twenty-nine branches of the bank in different cities have been designated for sale of these bonds.

Commodore Lokesh Batra (retired), in an RTI (Right to Information) application of October 26, 2020, sought details of the dates and the frequency with which the bank has monitored current accounts of political parties to ensure only those eligible are receiving funds through the bonds. The application was made when the 14th phase of the sale of these bonds was underway.

The bonds are sold in 10-day windows in four different quarters in January, April, July and October. Parties can encash these bonds within 15 days after the date of issue. By June this year, after the 13th tranche of sales, over 12,000 bonds worth over Rs 6,200 crore were sold; in the latest and 14th tranche, sale of which ended on October 28, 2020—just ahead of Bihar assembly elections, electoral bonds worth over Rs 280 crore were sold.

Under the electoral bonds scheme launched in January 2018, registered political parties that polled at least 1% of all votes cast in the previous general or assembly elections were eligible to receive funds.

Under RTI, Commodore Batra sought information on what action had been initiated in case bonds were sold to ineligible political parties.

In its reply of November 24, 2020, SBI stated: “SBI verifies the eligibility criteria of eligible political parties before start of each phase.” The reply also mentions that no information is available about action against ineligible parties that may have received funds through this route.

Commodore Batra said, “The response makes no sense; it only shows that SBI has done nothing about ensuring that only those eligible actually benefit from the Electoral Bonds.”

On May 29, 2020, the transparency activist had written to SBI to show that the eligibility of political parties would vary after each round of elections, given that they may secure one percent of the votes in one election, but fail to do so the next time.

When the electoral bonds scheme was challenged in the Supreme Court by NGOs like Association for Democratic Reforms (ADR), Common Cause along with the Communist Party of India-Marxist, the apex court sought that all eligible parties that received funds through electoral bonds should submit details of such receipts in sealed covers to the ECI.

In its April 12, 2019 interim order the SC stated: “… according to us the just and proper interim direction would be to require all the political parties who have received donations through Electoral Bonds to submit to the Election Commission of India in sealed cover, detailed particulars of the donors as against each Bond; the amount of each such Bond and the full particulars of the credit received against each bond, namely the particulars of the bank account to which the bond has been credited…”

A total of 105 political parties submitted details to the EC in sealed covers, and this list of parties was obtained by Commodore Batra through RTI. It was also submitted to the SC as an annexure by the secretary of the ECI during an SC hearing of the matter on February 3, 2020.

ADR, in its analysis of that list in June 2020, pointed to glaring problems with the whole electoral bonds scheme. Of the list of 105 parties, 69 were registered unrecognised parties – these are political parties registered under the Representation of the People Act, 1951; yet, they have been unable to establish themselves and some of them may never have contested elections at all. Vote share details of only 43 of them was available wherein only one of the parties had got the required share of votes to qualify for the electoral bond scheme – the Gondwana Gantantra Party that contested the Chhattisgarh assembly polls in 2018 and secured 1.73% of total votes polled.

It showed that electoral bonds were being issued to parties that may not be eligible for receipt of such funds under the norms laid down by the gazette notification of January 2, 2018. Of the 105 parties in the list, the last four did not have an address that could be verified. Commodore Batra said these four seemed odd to him and he submitted an RTI application to the SBI in June 2020 seeking an explanation. He has since followed up on this query and raised others too.

The ECI has, in the meanwhile, failed to put in the public domain a list of political parties eligible to receive funds through electoral bonds; such a list may have offered some clarity in this matter.

It appears, from responses to RTI applications, that SBI does not do much more than verify details of the parties at the time of the opening of bank account. “It is once money has been deposited in these accounts that the bank might need to check whether those receiving these funds are indeed eligible to receive them. How can political parties whose address cannot be verified benefit from the Electoral Bonds scheme?” Commodore Batra asked.

ADR, in its report analysing the list, recommended that the whole scheme be scrapped, given the gaping holes and utter lack of transparency.

In their petition to the SC, the two NGOs and CPI-M pointed out that the scheme was introduced as a Finance Act, thus bypassing the scrutiny of the Rajya Sabha. While ADR pointed out that almost all donations have gone to the ruling political party. Most bonds are also in the Rs 10 lakh or Rs 1 crore value denomination, showing that it is a scheme used primarily by corporates, going against the very grain of participatory democracy.

The Foreign Contributions (Regulation) Act, Finance Act of 2018, and the Companies Act were all amended to bring in the electoral bonds. The amendments mean that the Indian subsidiaries of foreign companies or even shell companies could donate to political parties. The changes in the law meant that the earlier cap that limited corporate donation to 7% of annual profit was removed. The Election Commission, which is empowered to oversee the whole election process, would no longer have any clue about the source of funding of political parties.

Unsurprisingly, the BJP is the biggest beneficiary of the scheme; after the first tranche of Rs 222 crore raised by the scheme, ADR noted that 95% of contributions were for the BJP.

NGO Commonwealth Human Rights Initiative notes on its website: “From buying up Opposition leaders, including elected representatives to setting up candidates to possibly divide the anti-BJP votes, to setting up a massive big data analytics infrastructure – micro social engineering – faking news-driven capture of public opinion has been facilitated by such huge funding.”

The Election Commission, in an affidavit in the SC, had opposed the scheme and pointed out that its ability to deal with financial malpractice in elections would be eroded. Huffington Post India carried a series of articles detailing the subterfuge involved in this scheme; ironically, that website recently wiped out its archives after rules on funding from foreign entities for news media in India were changed.