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Understanding Electoral Bonds: An Insight into India's Political Funding Mechanism

CMA Sonam Verma , Last updated: 14 March 2024  


Electoral bonds have emerged as a significant component of India's political funding mechanism, aiming to enhance transparency and accountability in political financing. Introduced by the Government of India in 2018, electoral bonds are financial instruments that allow individuals and corporations to donate money to political parties. Despite their intention to reform political funding, electoral bonds have sparked debates regarding their efficacy, transparency, and impact on democracy. In this article, we'll delve into the concept of electoral bonds, their functioning, controversies surrounding them, and their implications for Indian democracy.

What are Electoral Bonds?

Electoral bonds are essentially bearer instruments similar to promissory notes, which can be purchased by any citizen or corporate entity from select branches of authorized banks. These bonds are issued in multiples of specified denominations, ranging from Rs. 1,000 to Rs. 1 crore. Unlike traditional donations made directly to political parties, electoral bonds maintain the anonymity of the donor, as they do not bear the donor's name.

Understanding Electoral Bonds: An Insight into India s Political Funding Mechanism

Functioning of Electoral Bonds

  1. Purchase: Any individual or corporation can purchase electoral bonds from authorized banks during specific periods announced by the government.
  2. Donation: The purchased bonds can be donated to eligible political parties within fifteen days of issuance. Only political parties registered under the Representation of the People Act, 1951, and securing at least 1% of votes in the preceding general election are eligible to receive these bonds.
  3. Redemption: Political parties can encash these bonds within fifteen days of receipt through designated bank accounts. The redemption process ensures that the donated funds are deposited in the party's account without revealing the donor's identity.

Controversies Surrounding Electoral Bonds

  1. Anonymity of Donors: Critics argue that the anonymity provided by electoral bonds undermines transparency in political funding, as it conceals the identity of donors. This opacity raises concerns regarding potential quid pro quo arrangements between political parties and donors.
  2. Lack of Accountability: Electoral bonds do not require political parties to disclose the identity of donors publicly. This lack of disclosure reduces accountability and makes it challenging for citizens to scrutinize the funding sources of political parties.
  3. Potential for Money Laundering: Some experts raise concerns about the potential misuse of electoral bonds for money laundering funds into the political system due to the anonymity afforded to donors.
  4. Unequal Access: Critics argue that electoral bonds disproportionately benefit larger political parties with established connections to corporate entities, thereby exacerbating inequalities in political funding.

Implications for Indian Democracy

  1. Transparency vs. Anonymity: The use of electoral bonds reflects a delicate balance between enhancing transparency in political funding and protecting the anonymity of donors. Striking

this balance is crucial for promoting trust in the political process while safeguarding the privacy rights of individuals.

  1. Democratizing Political Funding: Electoral bonds have the potential to broaden the donor base by encouraging individuals and corporations to contribute to political parties. However, ensuring equal access to political funding remains a challenge, particularly for smaller or regional parties.
  2. Reforming Political Finance: Despite criticisms, electoral bonds represent an attempt to reform India's opaque political finance system by introducing a structured mechanism for donations. However, further reforms may be necessary to address existing loopholes and enhance transparency.


Electoral bonds constitute a significant step towards reforming political funding in India, aiming to balance transparency and donor anonymity. While they offer a structured mechanism for contributions to political parties, electoral bonds have sparked debates regarding their transparency, accountability, and potential for misuse. As India's democracy evolves, it is imperative to continually evaluate and refine mechanisms like electoral bonds to strengthen democratic institutions and foster greater public trust in the political process.

In recent case (Sharad Pawar v. Ajit Anantrao Pawar & Anr. | Special Leave Petition (Civil) No. 4248 of 2024) supreme court has ordered SBI to submit the Electoral bond funding details. Kindly refer the latest update on the case as on date.

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CMA Sonam Verma
(Practicing CMA)
Category Income Tax   Report

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