Electoral Bonds

  • IASbaba
  • April 7, 2022
  • 0
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  • GS-2: Structure, organization and functioning of the Legislature; Issues and challenges pertaining to elections
  • GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Electoral Bonds

Context: Chief Justice of India N V Ramana has assured petitioners that the Supreme Court will take up for hearing a pending plea challenging the Electoral Bond Scheme, 2018. 

  • Two NGOs — Common Cause and Association for Democratic Reforms (ADR) — have challenged the scheme, alleging that it is “distorting democracy”. 

What are electoral bonds?

  • Simply put, electoral bonds are an instrument through which anyone can donate money to political parties. 
  • Such bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.
  • They can be bought from authorised branches of the State Bank of India. 
  • As such, a donor is required to pay the amount via a cheque or a digital mechanism (cash is not allowed) to the authorised SBI branch. 
  • The donor can then give this bond to the party or parties of their choice. 
  • The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses. 
  • Any party that is registered and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds
  • The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor’s identity.

When were they introduced and why?

  • The central idea behind the electoral bonds scheme was to bring about transparency in electoral funding in India. 
  • In the Union Budget speech on February 1, 2017, then Finance Minister Arun Jaitley proposed two main changes. 
    • One, he reduced the amount of money that a political party could accept in cash from anonymous sources — from Rs 20,000 to Rs 2,000. 
    • Two, he announced the introduction of electoral bonds as a way to make such funding more transparent.
  • Formally, these bonds were introduced in 2018.

How many have been sold?

  • Electoral bonds can be bought only during specific windows of time. 
  • The 20th such window — between April 1 and April 10 — is currently open. 
  • According to a written reply in Rajya Sabha last month, Minister of State for Finance provided the break-up of the yearly sale of electoral bonds: 
    • Rs 1056.73 crore in 2018; 
    • Rs 5071.99 crore in 2019; 
    • Rs 363.96 crore in 2020; 
    • Rs 1502.29 crore in 2021; 
    • Rs 1213.26 crore in 2022.
  • In other words, in 19 tranches since 2018 when they were effectively available, bonds worth Rs 9208.23 crore have been sold. 
  • Of these, bonds worth Rs 9187.55 crore have been encashed by political parties.
  • Government also underscored that no bonds were sold to foreign entities because the scheme does not allow it.

Why have they attracted criticism?

  • The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do: bring transparency to election funding.
  • For example, critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties. 
  • The fact that such bonds are sold via a government-owned bank (SBI) leaves the door open for the government to know exactly who is funding its opponents. 
  • This, in turn, allows the possibility for the government of the day to either extort money, especially from the big companies, or victimise them for not funding the ruling party.
  • Therefore, the scheme provides an unfair advantage to the party in power. 
  • Critics have noted that more than 75 per cent of all electoral bonds have gone to the BJP, which is in power at the Centre.
  • Further, one of the arguments for introducing electoral bonds was to allow common people to easily fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).
  • Moreover, before the electoral bonds scheme was announced, there was a cap on how much a company could donate to a political party: 7.5 per cent of the average net profits of a company in the preceding three years. 
  • However, the government amended the Companies Act to remove this limit, opening the doors to unlimited funding by corporate India.


  • Voters can also help bring in substantial changes by demanding awareness campaigns. If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher. 
  • Electoral bonds have raised questions on the electoral legitimacy of the government and thus the whole electoral process has become questionable. In this context, the courts should act as an umpire and enforce the ground rules of democracy.

Connecting the dots:

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