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Electoral Bonds

Electoral Bonds


The apex court has flagged the possibility of misuse of money received by political parties for activities like funding terror or violent protests.

Probable Question:

  1. “Electoral bonds are just one step forward compared to the old system of cash funding.” Comment.

About Electoral Bonds:

● Electoral bonds are interest-free bearer instruments used to donate money anonymously to political parties. A bearer instrument does not carry any information about the buyer or payee and the holder of the instrument (which is the political party) is presumed to be its owner. It was announcedin the 2017 Union Budget.

Only political parties registered under Section 29A of the Representation of the People Act, 1951 that has secured not less than 1 per cent of votes polled in the last general election to the House of the People or the Legislative Assembly of the State is eligible to receive such donations.

● The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and the State Bank of India (SBI) is the only bank authorised to sell them. Donors can purchase and subsequently donate the bonds to their party of choice, which the party can then cash through its verified account within 15 days. There is no limit on the number of bonds an individual or company can purchase. SBI deposits bonds that a political party hasn’t cashed within 15 days into the Prime Minister’s Relief Fund.

Benefits of electoral bonds:

● It is argued that it would promote transparency in political funding as donors are required to donate through verified KYC accounts.

● The scheme is one step forward compared to the old system of cash funding, which was unaccountable.

Issues with electoral bonds:

Secrecy of donors: Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.

Elimination of a cap of 7.5% on corporate donations, elimination of the requirement to reveal political contributions in profit and loss statements and also the elimination of the provision that a corporation must be three years in existence, dilutes the purpose of the scheme.

● Earlier, foreign companies or companies where the controlling stake was held by a foreign company couldn’t contribute; now they can. India’s political parties could theoretically be fully funded by a foreign company operating in India or by a foreign entity through a shell company.

● The ruling party via the State Bank of India (SBI) may have a full account of all donations being made via electoral bonds, to itself and Opposition parties.

Crony Capitalism: The confluence of uncapped corporate resources funding political parties can only lead to private corporate interests taking precedence over the needs and rights of the people of the state in policy considerations.

The Election Commission, in its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in May 2017, had objected to the amendments in the Representation of the People (RP) Act, which exempt political parties from disclosing donations received through electoral bonds. It described the move as a “retrograde step”.


Transparency in political funding is important to insulate corporate influence into the politics and governance of the country. Opacity in political funding goes against the basic tenets of democracy. There are several reforms suggested by the Election Commission, Indrajeet Committee, and Goswami Committee for electoral funding, they should be aimed to be implemented immediately.

Electoral Bonds
Electoral Bonds
Electoral Bonds
Electoral Bonds
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