In the 2017 Union Budget, Finance Minister Arun Jaitley had touched upon the idea of transparency in electoral funding and floated the proposal of electoral bonds.

On Tuesday, Jaitley told the Lok Sabha that the electoral bonds could be bought by donors from State Bank of India, and that political parties will be able to encash these bonds only in their designated bank accounts. The bonds, he said, would have a validity of 15 days, within which the parties have to encash them.

From the very day it was announced, there have been question marks over how the bonds will make political funding transparent. Jaitley had then said that the money comes into party accounts through the banking channel. With political parties necessarily having to furnish their accounts before the Election Commission of India, it becomes transparent, he had pointed out.

However, the name of donors, who give the bonds to the parties, remains confidential, keeping alive the possibility of crony capitalists using these bonds to their advantage. The government had pooh-poohed the suggestion, saying in the case of industrialists and corporates, the buying of bonds will have to be accounted in the company's accounts.

The details provided by Jaitley in Parliament suggested that donors will have to go through a complete KYC procedure, before they could purchase these electoral bonds from banks. These electoral bonds are pitched as an alternative to cash donation by the government.

The bonds will be available across specified branches of SBI for 10 days in the months of January, April, July and October, Jaitley said on Wednesday. The bonds will be available in multiples of Rs 1000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore.

"This instrument seeks to promote cashless political donations. But, the big negative of this instrument is the anonymity it promises to the political parties and donors. No one knows which hands are exchanging the money at the end of the day," said Anil Verma, head, Association of Democratic Reforms (ADR), which conducts studies on Indian polls and its political system.

Last year, a report from ADR, that collates data on funding of political parties, showed various political parties received Rs 7,833 crore of funding from unknown sources between 2004-05 and 2014-15, which constituted 69 per cent of their total income during the period.

According to finance ministry sources, the government had faced a lot of opposition from all political parties on suggestions to make their donor list public. "There is still scope for improvement of the electoral bonds and we welcome all suggestions on it," Jaitley said, indicating that further changes to the transparency of these bonds could be made in the future.

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