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Electoral Bonds

Published: 5th Apr, 2021

Recently, the Supreme Court of India dismissed the petitions that sought to put a stay on fresh sale of electoral bonds ahead of the state elections of West Bengal, Assam, Kerala, Tamil Nadu, and the UT of Puducherry.


Recently, the Supreme Court of India dismissed the petitions that sought to put a stay on fresh sale of electoral bonds ahead of the state elections of West Bengal, Assam, Kerala, Tamil Nadu, and the UT of Puducherry.


  • The Supreme Court dismissed two stay applications that were filed by NGO Association for Democratic Reforms, in 2019 and earlier this month.
  • A three-judge bench of the SC headed by Chief Justice of India (CJI) noted that the sale of these bonds, which began in January 2018, has continued “without any impediment” in the past three years.
  • The Supreme Court of India, in 2019, had introduced an interim “safeguard”, which directed all political parties to submit details of receipts that they received through electoral bonds to the Election Commission in a sealed cover.
  • The safeguard was introduced as an interim measure until the decision on pending petitions questioning the validity of Electoral Bond was decided.
  • A petition challenging the constitutional validity of the Electoral Bond scheme was filed in the Supreme Court in 2018.
  • This case, which is vital for the health of Indian democracy, has been left unheard by the Supreme Court.


What is the Electoral Bond Scheme?

  • The Scheme was announced in the Union Budget of 2017.
  • Electoral Bonds are interest-free bearer instruments, which are used to donate money to political parties, anonymously.
  • The specialty of a bearer instrument is that it does not carry any information about the buyer and the holder of the instrument (in this case, the political party) is presumed to be its owner.
  • The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and the only authorized bank that can sell them is the State Bank of India (SBI).
  • The party could encash the bond within 15 days through its verified account.
  • No upper limit has been imposed on the number of bonds an individual or company can purchase.
  • Donation can be made by:
    • Companies
    • Foreign Nationals
    • Individuals or groups of individuals
    • NGOs, religious and other trusts

Increasing Popularity of the Scheme

  • According to the Government, electoral bonds will help them in preventing the flow of black money into elections.
  • Electoral bonds have become the dominant method for funding political parties in India, in the last three years.
  • According to an analysis by ADR, more than half the total income of national parties and the regional parties for the financial year 2018-19 came from electoral bonds donations.
    • The biggest beneficiary of this scheme has turned out to be the Bharatiya Janata Party (BJP).

Stand of Election Commission on the Scheme

  • The Election Commission has opposed the exemption of political parties from disclosing the donation received by them.
  • In a letter to the Law Commission, it has asked the Government to ‘reconsider’ and ‘modify’ the above amendment.

Stand of RBI on the Scheme

  • According to RBI, such a scheme has no precedent in the world.
  • RBI has highlighted that the scheme can help in money laundering. According to RBI, the bonds can be misused and could lead to more black money.
  • RBI also feared that it would make political funding opaque.

Why has the scheme been opposed?

  • Circumvent citizens ‘Right to Know’:
    • Before the introduction of electoral bonds, political parties needed to disclose details of all their donors, who have donated more than Rs 20,000.
    • But with the coming of Electoral bonds, Political parties are not required to disclose any amount of funding they receive to citizens or voters.
    • Thus, the voter may never know, which political party is getting funded by which individual or organization and to what extent.
    • This infringes the citizens ‘Right to know’ and makes political parties even more unaccountable.
  • Provides undue advantage to the ruling party:
    • The electoral bonds, which provide anonymous and limitless donations to political parties, do so
    • To elaborate, the Government (i.e. the ruling party), can always access details of people who have donated them by demanding data from the State Bank of India (SBI).
    • While other political parties will have no information regarding the donations they receive.
    • Thus, the bonds incline information towards the ruling party, making the bonds inherently undemocratic.
  • Government Policy can get biased:
    • Money has been the most effective way of buying a policy, across all democratic societies.
    • Electoral bonds help skew the field in one’s favor, as only the political party knows individuals or organizations who have donated for them.
    • Electoral bonds create a much severe problem as citizens are kept in the dark about the source of money. It becomes impossible for them to assess whether any government policy is nothing more than a quid pro quo to benefit its funders.
    • Democracies have always tried to limit the role of money in influencing politics.
    • For example, in many advanced countries, elections are funded publicly, and it is ensured that there does not exist a wide gap between the ruling party and the opposition.
    • The electoral scheme, on the other hand, removes all limits and allows corporations with huge sums of money to buy politicians.
    • This defeats the entire purpose of democracy, which as B.R. Ambedkar memorably pointed out, was not just to guarantee one person, one vote, but one vote one value.
  • No proof that the scheme helps in circumventing Black Money:
    • Apart from this, it has not been established yet how donor anonymity, limitless donations, and reducing transparency can help in preventing black money.


  • By suppressing information of political financing, we are hampering the basic tenets of democracy like transparency and accountability. An unsettled law is as dangerous as a poor law. The Court must once and for all, settle the questions around the constitutionality of electoral bonds.

Verifying, please be patient.

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