Electoral bond configured as a promissory note

Finance Minister Arun Jaitely brought out the details of Electoral Bonds that are aimed to make corruption free financing of political parties. As per the Finance Minister’s disclosure, a citizen of India or a company registered in India can purchase the bond to give donations to political parties.

The bond will be available in the denomination of Rs 1000, Rs 10000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore. Multiples of these denominations can be used by the donor implying that big amount can be given to the political parties.

State Bank of India will be the banking outlet for issuing the electoral bond. Strong KYC norms are also incorporated, and the payment should be routed from the donor’s bank account. At the same time, name of the payee (means name of the office bear of the beneficiary political party) need not be mentioned.

Electoral bond is a promissory note

The financial profile of the instrument indicate that it is rather a promissory note and doesn’t carry the typical features of a bond. As a financial instrument, the electoral bond will be a bearer instrument in the nature of a promissory note. This means that the instrument is a certificate to pay a specified amount with binding date. At the same time, unlike in the case of usual promissory notes, there is no interest payment obligation.

All political party that have secured at least 1% votes polled in the last Lok Sabha or Assembly election will be eligible to get donations through electoral bonds. 

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