India’s political funding has always been under great scrutiny by transparency activists. With the announcement of electoral bonds in 2017, it’s a matter of concern that will electoral bonds be able to satisfy the need for which they were introduced?  

Donations to political parties have always been a matter of controversy. Especially in India, when donations to a party are defined by the system of electoral bonds, it becomes highly important to understand the procedure and also whether this system of donating anonymously to a political party is hindering the process of transparency of the democratic values of the country or is actually safeguarding the constitution.  

Recently the supreme court of the country has refused to order on a plea seeking a stay on the sale of fresh electoral bonds ahead of the upcoming state assembly elections in West Bengal, Tamil Nadu, Kerala, Assam, and the Union Territory of Puducherry. The plea seeking a stay on the sale of electoral bonds was filed by Association for Democratic Reforms (ADR) in March, this year. The plea was rejected on the grounds that the electoral bonds scheme ‘already’ has ‘certain safeguards’.

Apart from this, it is also important here to note that there is another petition still pending in the Supreme Court that challenges the constitutionality of the electoral bonds in the country. The plea was filed by Association for Democratic Reforms (ADR), a non-profit organisation that works for electoral transparency and accountability.

What is an Electoral Bond?

An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from the State Bank of India. Electoral bonds are interest-free bearer instruments basically used to donate money anonymously to political parties in the country. The bonds were announced in 2017 and in January 2018, the Narendra Modi-led NDA government notified the Electoral Bond Scheme 2018. 

Electoral bonds refer to bond which has a certain specified face value that’s mentioned on it just like a currency note. As per the instructions these bonds can be used by an individual, institution, firm, agency, or organisation to donate money to political parties in India. Also, it has been clearly mentioned that the electoral bonds will be available only in the denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and the State Bank of India (SBI) is the only bank authorised to sell them valid for 15 days from the date of purchase.

Sample of an Electoral Bond

The donations can only be made to:

As per the Electoral Bond Scheme of 2018, donations can only be made to a party registered under section 29A of the Representation of the People’s Act of 1951. Also, the party in order to receive donations via electoral bonds must have secured at least one percent votes in the latest Lok Sabha or State elections.

The donations can only be made by:

In the case of a company, any company which does not come under government and has been in existence for at least three years can contribute to any amount directly or indirectly to any political party of its choice.

Why was electoral bonds scheme adopted?

It was in 2017 when for the first time the idea of electoral bonds was suggested in the Union Budget. Before 2017, according to the rules, if a political party receives donations of less than Rs. 20,000 from a donor, then it was not at all mandatory for the party to reveal the source of funding. But the rule was misused and a huge amount of black money was being generated as various parties started receiving 90 percent of their funds in cash.

Therefore, the NDA government came up with the electoral bonds scheme in order to reduce the wellspring of corruption occurring in India. The new political funding mechanism, known as electoral bonds was brought in to bring transparency to the system.   

Is the agenda fulfilled?

Many experts believe that the move to adopt electoral bonds scheme can be misused easily due to the lack of information about the individual or the organisation who is donating the funds. Instead of bringing transparency and accountability, this system by many is believed to bring opacity as the identity of the donor is completely unknown.

Apart from this, another argument that opposed the system of donating funds via electoral bonds is that the process works in the favour of the ruling government as the donor as well as the receiver bank knows the identity of the person. Interestingly, both the banks have to report to the Reserve Bank of India (RBI) which in turn comes under the jurisdiction of the Central government.  

Also, it should be noted that there is no limit to the number of bonds an individual or an organisation can purchase. A total of around 12,924 electoral bonds worth Rs. 6534.78 crore were sold in 15 phases between March 2018 to January 2021.

Why electoral bonds are being opposed?

The anonymity of the donor is of course a major factor why this process of donation is opposed. Also, many activist groups for transparency such as the Association for Democratic Reforms (ADR) and even the Election Commission of India have opposed this popular route of donations as they believe that anonymity can lead to corruption and can even harm democracy.

Many believe that the electoral bonds scheme is a threat to democracy as it violates the basic function of democracy of informing its citizens by hiding the identity of the donor.