Electoral Bonds

What are Electoral Bonds (EBs)?

This is a bearer instrument in the nature of a Promissory Note that is payable to the bearer on demand and is interest-free.

According to the official notification, electoral bonds can be purchased by any citizen of India – singly or along with other individuals – or a body incorporated in India. Only registered political parties that secured at least 1% of the votes polled in the last general elections are eligible to receive this instrument, which can be encashed by eligible parties only through bank accounts in authorised banks, currently only SBI.

The instrument is issued in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore and its sale is opened once in every quarter for 10 days, and for a month ahead of general elections or as notified by the government. They are valid for only 15 days.

A donor can purchase electoral bonds from a specified bank only by a banking instrument.  He would have to disclose in his accounts the amount of political bonds that he has purchased.  The life of the bond would be only 15 days.  A bond can only be encashed in a pre-declared account of a political party.  Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the Election Commission.  The entire transactions would be through banking instruments.

Benefits –

  • Introduced as an alternative to cash donations.
  • Increase transparency in political funding and curb the usage of black money. Requirement of KYC increases accountability which is absent in case of cash transactions. Also, political party will have to file returns before the EC as to how much money has come through electoral bonds, which will provide accountability.
  • Ensures anonymity and safety of the donors against post poll harassment or intimidation.
  • Usage of proper banking channels in electoral funding.
  • Limited life of 15 days thus checking the scope of misuse.
  • Puts a leash on the income and expenditure by political parties. A political party has to deposit these into its bank account and obtain the formal cash (electronic or physical) and expenses incurred from these bonds have to be accounted for.


Problems –

  • Would unduly favour the ruling party.
  • Against free and transparent elections.
  • The inherent anonymity of the scheme. The right to vote means making an informed choice – knowing the candidate was only “half of the exercise” and citizens must know the parties which are funding the candidates. As the bonds are anonymous, they can be used to hoard black money.
  • Secrecy and anonymity also may lead to lobbying and capture of the government by big donors.
  • Introduction of the bill as a finance bill.
  • Removal of donation limits is a problem. It has opened the floodgates to unlimited corporate donations to political parties and anonymous financing by companies, which can have serious repercussions on Indian democracy.
  • Creates hurdles in the regulatory functioning of the Election Commission.
  • As EBs are bearer bonds, they can be misused as currency thus calling the autonomy of RBI in question. (15 days shelf life can take care of this).
  • The Election Commission had warned that this would allow illegal foreign funds to be routed to political parties.


Way ahead:

  • Removal of the Rs. 2000 limit for cash donations disclosure.
  • Intrusive scrutiny of election expenditure.
  • Increasing election expenditure limit.
  • Shorter campaign period.
  • Simultaneous elections.
  • Creation of National Electoral Fund where all donors can contribute.
  • Public funding of elections.
  • Focus on public funding.
  • Limits on donations.
  • Complete transparency in funding.
  • Strict penalties for non-compliance.
  • Political parties must voluntarily choose to disclose their sources of funds, total income and expenditures.
  • Political parties need to be under the Right to Information Act. The Central Information Commission ruled that they were, but the parties refuse to follow its directions.











Categories: POINT IAS

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