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Electoral Bonds Scheme in India

Why is it in the news?

  • Recently, Electoral bonds have stirred debates around political transparency and donor anonymity.
  • As the Supreme Court is set to review their constitutionality, this article analyses the motives, implications, and differing perspectives on the scheme.

Electoral Bonds


  • These are financial instruments introduced in 2017, similar to promissory notes.
  • Like a promissory note, they are “bearer instruments”, meaning whoever holds the bond is the owner, and they can be cashed (or redeemed) on demand.



  • These bonds were designed to allow donors (whether individuals or corporations in India) to donate to political parties without revealing their identity to the general public.
  • The primary aim was to ensure clean and transparent funding for political entities.
  • Reduce the anonymous cash donation limit from Rs 20,000 to Rs 2,000.



  • Interest-free: Holders of these bonds do not earn any interest on them.
  • Denominations: They are available in varying amounts ranging from Rs 1,000 to Rs 1 crore.
  • Purchase Location: They can be bought only from specific State Bank of India (SBI) branches that are authorized to sell them.
  • KYC Compliance: To buy these bonds, one needs to have an account that complies with the Know Your Customer (KYC) norms, ensuring that the source of the money is legitimate.
  • Validity: Once purchased, political parties have a window of 15 days to cash these bonds. If not cashed within this period, the bonds become void.
  • Limited Availability: They aren’t available for purchase all year round. They can only be bought during specific 10-day windows in the months of January, April, July, and October.


Eligibility for Receiving Donations

  • Only political parties registered under Section 29A of the Representation of the Peoples Act, 1951, can receive donations through these bonds.
  • Additionally, these parties must have secured at least 1% of the votes in the last election to either the Lok Sabha (House of the People) or a State Legislative Assembly.
  • Rationale Behind Section 29A: This section of the Representation of the Peoples Act, 1951, deals with the registration process of political parties with the Election Commission of India. By tying the eligibility of receiving bond donations to this section, it ensures that only recognized and legitimate political parties can benefit from this scheme.


Arguments For

  • Transparency in Transactions: Donations through banking channels, subject to KYC norms, can be traced if necessary, eliminating black money from political funding.
  • Protecting Donors: In a politically charged environment, anonymity can protect donors from potential backlash based on their political affiliations.
  • Tax Compliance: Since transactions are through official channels, they adhere to tax obligations.


Arguments Against

  • Selective Transparency: Critics argue that the scheme ensures transparency for the government (knowing who donated to whom) but keeps the public in the dark.
  • Potential for Misuse: Anonymity might be misused by parties to receive large funds without public accountability. It also opens doors for quid pro quo arrangements.
  • Foreign Influence: Changes allowing parties to receive foreign funding raises concerns about undue influence in Indian policymaking.


Key Stakeholdersā€™ Perspective


Election Commission of India:

  • Voiced concerns about exempting parties from disclosing bond donations.
  • Raised alarm over unchecked foreign funding.


The Central Government:

  • Emphasizes the bondsā€™ role in reducing black money in politics.
  • Asserts that the right to know for citizens has “reasonable restrictions”.




Suggestions & Way Forward

  • While the original intent of electoral bonds was to enhance transparency in political donations, the anonymity it offers has raised concerns. A potential solution could be to maintain donor anonymity from the public but disclose donor details confidentially to an independent regulatory body like the Election Commission. This would balance donor privacy while ensuring oversight.


  • Given the concerns of foreign influence over Indian politics, it’s vital to either restrict or clearly define the guidelines under which foreign entities can purchase electoral bonds. Regular audits can ensure that foreign donations comply with the set norms.


  • Political parties should be mandated to submit regular reports detailing the bonds they’ve received, amounts, and how these funds were used. While donor details may remain confidential, the frequency, amount, and utilization of the funds should be transparent.


  • The Election Commission should play a more active role in overseeing the electoral bond process including monitoring bond sales, redemptions, and ensuring political parties’ compliance with all associated regulations.


  • Lastly, given the dynamic nature of politics and economics, the electoral bond system should undergo periodic reviews. This will ensure it remains relevant, effective, and aligned with the intended goal of promoting transparency and curbing black money in political funding.

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