[Burning Issue] Electoral Bonds

Government notifies electoral bonds for political donations

Why in news?

  1. Details such as denominations, validity, and eligibility of the purchasers were announced by Finance minister for the electoral bonds scheme announced during the 2017 Budget
  2. Electoral bonds will allow donors to remain anonymous and pay political parties using banks as intermediaries

Highlights of the scheme

  • Electoral bonds would be a bearer instrument in the nature of a promissory note and an interest-free banking instrument
  • A citizen of India or a body incorporated in India will be eligible to purchase the bond
  • Electoral bonds can be purchased for any value in multiples of ₹1,000, ₹10,000, ₹10 lakh, and ₹1 crore from any of the specified branches of the State Bank of India
  • The purchaser will be allowed to buy electoral bonds only on due fulfillment of all the extant KYC norms and by making payment from a bank account
  • The bonds will have a life of 15 days (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency)
  • They can be used to make donations to registered political parties that have secured not less than 1% of the votes polled in the last election to the Lok Sabha or Assembly
  • The bonds shall be available for purchase for a period of 10 days each in the months of January, April, July, and October, with an additional 30 days to be specified by the Central government in the year of a general election
  • The bond shall be encashed by an eligible political party only through a designated bank account with the authorized bank

Why is the name of the donor not being disclosed?

  • Bonds would get reflected in the balance sheet of the donors
  • Currently,  for a very large part of donation coming to political parties by the donors, quantum and source is not known
  • The past experience has shown that once the names are disclosed, there is a tendency to shift to cash donations.
  • Bonds will ensure cleaner money coming from donors, cleaner money coming to political party and ensure significant transparency

Why was this scheme brought?

  • To ensure that the funds being collected by the political parties is accounted money or clean money
  • It will also boost digital transactions


  • While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
  • Also income tax breaks may not be available for donations through electoral bonds. This pushes the donor to choose between remaining anonymous and saving on taxes.
  • Also, privacy of the donor is compromised as the bank will know their identity.
  • The opposition has pointed out that the bonds will help any party that is in power because the government can know who donated what money and to whom.
  • It can tantalize the buyer of the bond into trading in it for profit. An example is in order. Suppose a company (not an honest one) buys bonds worth Rs 200 crore from a designated branch of the SBI. Remember electoral bonds can remain in circulation for 15 days before they find their way into a political party’s coffers. It is during this crucial period that danger lurks. Suppose a moneybag wanting anonymity is on the prowl and there is a sympathetic political party hungering for his munificence? What would happen? Well, he would buy the bonds for Rs 225 crore by paying cash to the original subscriber. Who could have thought the docile electoral bonds would electrify further the hurly-burly world of black money? In other words, there could be two owners of these bonds in the short time period of 15 days they are allowed to circulate without hindrance. Who knows there could be a third within the above example of a Johnny-come-lately offering Rs 230 to the buyer in the black market?

Way forward

  • Former Chief Election Commissioner S.Y. Quraishi has suggested an alternative worth exploring
  • A National Electoral Fund to which all donors can contribute
  • The funds would be allocated to political parties in proportion to the votes they get.
  • Not only would this protect the identity of donors, it would also weed out black money from political funding.
  • There can be a tax benefit for those who donate to the fund


  1. Will the electoral bonds scheme be successful in achieving the coveted objective of transparency in political funding? Critically analyse.

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