About Electoral Bonds:

  • Electoral Bonds are a type of financial instrument that can be used to make payments to political parties.
  • The bonds are available in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh, and Rs. 1 crore, with no upper limit.
  • The State Bank of India is authorized to issue and redeem these bonds, which have a fifteen-day validity period.
  • These bonds can be redeemed in a registered political party’s designated account.
  • The bonds are available for purchase by any person (who is an Indian citizen or who is incorporated or founded in India) for ten days in each of the months of January, April, July, and October, as determined by the Central Government.
  • Individuals can purchase bonds either alone or collectively with other individuals.
  • The name of the donor is not included on the bond.


  • The Electoral Bond Scheme serves as a deterrent to traditional under-the-table payments by requiring cheque and digital paper trails of transactions. However, the scheme’s key components make it very controversial.

The Supreme Court Observed the Misuse of Electoral Bonds:

  • Anonymity: Neither the donor (who could be an individual or a corporation) nor the political party is required to disclose the source of the donation.
  • Because the bonds are bought through the State Bank of India (SBI), the government always knows who the contributor is.
  • This knowledge asymmetry has the potential to skew the process in favor of whichever political party is in power at the moment.
  • The removal of a 7.5 percent cap on corporate donations, the necessity to disclose political contributions in profit and loss statements, and the requirement that a corporation be three years old all undercut the scheme’s aim.
  • A shell company can anonymously donate an unlimited amount to a political party, providing a simple avenue for businesses to round-trip funds stashed in tax havens in exchange for a favor or advantage.

Defense by the Government:

  • Only parties registered under the Representation of the People Act 1951 were eligible to accept donations through electoral bonds, and they could not have received fewer than 1% of the votes cast in the previous election.
  • To Combat the Threat of Black Money in Politics: The Bonds include solely white money, as the amounts are paid only by check or demand draft.

KYC requirements are also adhered to.

  • Support from the Election Commission of India (ECI): The ECI was not opposed to the bonds, but was concerned about the anonymity component.
  • It also urged the court not to halt the bonds, claiming that the program is a step forward from the previous system of unaccountable cash funding.

Next Steps:

  • Effective political financing regulation, as well as radical reforms, are required to break the vicious cycle of corruption and deterioration of democratic polity quality.
  • To make the entire governance machinery more responsible and transparent, it is critical to close the gaps in current laws.
  • Voters can also have a role in bringing about significant changes by requesting public awareness campaigns. Democracy would advance a notch if voters rejected candidates and parties that overspend or bribe them.

Source: THE HINDU.