Electoral Bonds - Free MCQ Practice Test with solutions, UPSC Indian Polity

1. Electoral Bonds validity period - 30 calendar days: Incorrect. Electoral Bonds are valid for fifteen calendar days from the date of issue.

2. Purchase method - Only digitally or through cheques: Correct. One can purchase these bonds only digitally or through cheques.

3. Encashment - Only by an eligible Political Party through any bank account: Incorrect. The Electoral Bonds can be encashed by an eligible Political Party only through a bank account with the Authorized Bank (State Bank of India).

4. Transparency - Helps political parties operate transparently with the election commission and regulatory authorities: Correct. Electoral Bonds help political parties to operate in a more transparent manner with the election commission, regulatory authorities, and the general public.

Pairs 2 and 4 are correctly matched.

Electoral Bonds in India primarily serve the purpose of enabling anonymous donations to political parties. This system allows individuals, corporations, and any entity eligible to purchase these bonds to contribute funds to political parties without disclosing their identities. The intent behind this mechanism is to bring transparency to political funding while also safeguarding the privacy and security of the donors.

Electoral Bonds in the Indian political system primarily aim to ensure transparency and accountability in political funding. By channeling donations through banking channels and mandating disclosure of party bank accounts to the Election Commission of India, the system aims to make the process more transparent. This measure helps in tracking the flow of funds and holding political parties accountable for their financial activities, promoting cleaner and more ethical political financing practices.

1. Incorrect: Electoral Bonds can only be purchased by a person who is a citizen of India or incorporated or established in India. Hence, statement 1 is incorrect.

2. Correct: Electoral Bonds are indeed interest-free instruments that are payable to the bearer on demand. Hence, statement 2 is correct.

3. Correct: Only political parties that are registered under Section 29A of the Representation of the People Act, 1951, and have secured not less than one percent of the 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. Hence, statement 3 is correct.

Therefore, the correct answer is Option D: 2 and 3 Only.

1. Electoral Bonds - Bearer bonds or promissory notes: Correct. Electoral Bonds are similar to bearer bonds or promissory notes where the bank acts as the custodian and pays the holder of the bonds.

2. Electoral Bonds - Interest bearing: Incorrect. Electoral Bonds are interest-free.

3. Electoral Bonds - Can be purchased by foreign nationals: Incorrect. Electoral Bonds can only be purchased by a person who is a citizen of India or an entity incorporated or established in India.

4. Electoral Bonds - Payable to the bearer on demand: Correct. These bonds are like banknotes and are payable to the bearer on demand.

Thus, pairs 1 and 4 are correctly matched.

1. Anonymity of electoral bonds is only for the broader public and opposition parties, not for the government. This statement is correct. The government can access donor details through the State Bank of India, but the public and opposition parties remain unaware, which contradicts the transparency goal of electoral bonds.

2. Political parties must disclose details of all its donors who donate more than Rs 20,000 even after the introduction of electoral bonds. This statement is incorrect. The introduction of electoral bonds has exempted political parties from disclosing donations received through these bonds, which was a requirement before their introduction.

3. Electoral bonds eliminate the 7.5% cap on company donations, allowing even loss-making companies to make unlimited donations. This statement is correct. The electoral bond scheme removed the cap on corporate donations, enabling companies, including loss-making ones, to donate without any limit.

Thus, the correct answer is Option B

1. Contradicting its Basic Idea - Incorrect. The electoral bonds scheme is criticized for not bringing transparency to election funding as it was meant to do. It actually maintains anonymity for the broader public and opposition parties, contrary to its intended purpose of transparency.

2. Hindering Right to Know - Correct. Voters cannot know the sources of political funding, which infringes on their 'Right to Know' and makes the political class less accountable.

3. Shallow Anonymity - Correct. Anonymity does not apply to the government, which can access donor details from the State Bank of India, but taxpayers remain in the dark.

4. Leading to Crony-Capitalism - Correct. The electoral bonds can facilitate anonymous funding, potentially leading to the infusion of black money and crony-capitalism.

Hence, three pairs are correctly matched.

• Statement 1 is correct. The Electoral Bonds can be purchased only digitally or through cheques, which discourages cash transactions and promotes transparency.
• Statement 2 is incorrect. The validity period of Electoral Bonds is fifteen calendar days from the date of issue, not thirty days. If the bond is deposited after the expiry of the validity period, no payment is made to any payee political party.
• Statement 3 is incorrect. One of the benefits of Electoral Bonds is that they maintain the anonymity of the donor, meaning the identity of the donor is not disclosed.

Therefore, only Statement 1 is correct.

Statement-I accurately describes the process of purchasing Electoral Bonds, emphasizing the digital or cheque payment options and the specific denominations available.
Statement-II correctly highlights the transparency aspect of Electoral Bonds, stating that donations require disclosure of the party's bank account with the ECI. This statement complements Statement-I by providing additional information on the purpose of these bonds, which is to enhance transparency in political funding.
Therefore, both statements are correct, with Statement-II explaining the significance of Statement-I in promoting transparency and accountability in political party financing.

In the context of the given statements, Statement-I correctly describes Electoral Bonds as instruments used to donate funds to political parties, introduced through the Finance Bill 2017 and notified in 2018. However, Statement-II is incorrect as Electoral Bonds are not interest-bearing financial instruments like fixed deposits. Instead, they are akin to bearer bonds or promissory notes, interest-free and payable to the bearer on demand. Therefore, while Statement-I is accurate, Statement-II is misleading and does not correctly describe Electoral Bonds as outlined in the source material.