28 Nov 2019

Electoral bonds3 min read

Source: The Hindu

Manifest pedagogy: Electoral bonds are seen as a major policy change in election funding by the current government. It is seen as a policy reform which will help clean up the corruption in election funding. But the loopholes in the Bonds ranging from anonymity of the donor to the limit of 2,000 rs are being questioned by RBI and Election Commission. This is an area of importance for both Prelims and Mains.

In news: The Election Commission (ECI) and the RBI has recently expressed reservations about the Electoral Bonds scheme.

Placing it in syllabus: Electoral reforms

Static dimensions: What are electoral bonds?

Current dimensions:

  • Advantages 
  • Concerns
  • Way forward 


What are electoral bonds?

  • An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from 29 specified SBI branches.
  • The citizen or corporate can then donate the same to any eligible political party of his/her choice.
  • They are similar to bank notes that are payable to the bearer on demand and are free of interest.
  • An individual or party will be allowed to purchase these bonds digitally or through cheque.
  • The electoral bonds were introduced with the Finance Bill (2017) and in January, 2018 the Electoral Bond Scheme was notified.
  • The Security Printing & Minting Corporation of India (SPMCIL), has been authorised to print the electoral bonds.
  • The range of a bond is between Rs 1,000 to Rs 1 crore.
  • A donor with a KYC-compliant account can purchase the bonds and can then donate them to the party or individual of their choice.
  • The receiver can encash the bonds through the party’s verified account.
  • The electoral bond will be valid only for fifteen days.
  • The first 10 days of January, April, July and October has been specified by the government for purchase of electoral bonds.
  • An additional period of 30 days shall be specified by the government in the year of Lok Sabha elections.
  • A donor will get a tax deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.
  • In April, 2019 the Supreme Court asked all the political parties to submit details of donations received through electoral bonds to the ECI and asked the Finance Ministry to reduce window of purchasing electoral bonds from 10 days to five days.

Eligibility of party to get electoral bonds:

  • Any party that is registered under section 29A of the Representation of the People Act, 1951 and has secured at least one percent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds.
  • The party will be allotted a verified account by the ECI and the electoral bond transactions can be made only through this account.


  • The electoral bonds would keep a tab on the use of black money for funding elections and this brings about transparency.
  • As the electoral bonds will not bear the name of the donor the political party might not be aware of the donor’s identity.
  • As the voter does not know who is funding whom through electoral bonds it is supposed to protect the donors from harassment from the authorities.


  • The civil rights societies opine that the concept of donor “anonymity” threatens the very spirit of democracy.
  • Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.
  • Public will have no idea of how and through whom a political party has been funded.
  • Since the identity of the donor has been kept anonymous, it could lead to an influx of black money. 
  • The mere reduction in donation limit from ₹20,000 to ₹2,000 is not effective as there are parties with hundreds of crores of declared income who claim that all the funds were received from small cash donations of ₹100 or less. 
  • Since neither the purchaser of the bond nor the political party receiving the donation is required to disclose the donor’s identity, the shareholders of a corporation will remain unaware of the company’s contribution. 

Way forward:

The ECI in April, 2019 told the SC that, while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties and wanted full disclosure and transparency. 

The RBI had warned the government that the bonds would “undermine the faith in Indian banknotes and encourage money laundering.”

Hence complete transparency is needed in all funding. Political parties need to be under the Right to Information (RTI) Act. There must be spending limits as well as donation limits. The real extent of political expenditure can be known by modern data capture and analysis.

It is possible for dedicated watchdogs, including voluntary groups like the Association for Democratic Reform, to keep track of each and every item of political expenditure.

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