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  • Writer's pictureBrain Booster Articles


Author: Deepti Pathak, III year of B.A.,LL.B.(Hons.) from S.S Khanna Girls Degree College, Prayagraj

The scheme of electoral bonds was introduced by BJP led government in 2017 with the aim to bring transparency in electoral funding in India as an alternative to cash donations made to political parties. The concept of electoral bond was first pronounced by the Finance Minister Mr. Arun Jaitly in the Financial Bill,2017, On January 29, 2018 the government notified the Electoal Bond Scheme, 2018 to ensure transparency in political funding, this scheme allowed companies(incorporated in India), individuals, groups of individuals, NGOs, religious and other trusts to donate via electoral bond without disclosing their details. This scheme issued bonds in the nature of promissory note, it shall be bearer in character. A bearer instrument is one which, do not carry the buyer or the payee’s information. Ex facie, the process ensures that the name of the donor remains anonymous. Before the introduction of electoral bonds, political parties had to disclose the details of the donors, who have donated more than Rs. 20,000 but after 2017, the government capped the limit up to Rs. 2000.


An Electoral bond is form of donation for political parties through which anyone can donate money to political parties. It is a bearer instrument, like a bank note issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, can be bought from authorized branches of the State Bank of India. Any person or party can purchase these bonds either singly, jointly or with other individuals, and give donation to the political party of their choice, every donor has to provide his/her KYC details to purchase the electoral bonds while the donor’s name would be kept confidential. The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses, if the electoral bond is not encashed by the political party within validity of 15 days, same shall be deposited by the authorized bank to the Prime Minister Relief Fund(PMRF).

According to NDA led BJP government, electoral bonds were introduced to ensure “all the donations made to a political party would be accounted in for in the balance sheets without exposing the donor details to the public and electoral bonds would keep a tab on the use of black money for funding elections”.

For being eligible to receive electoral bonds the political parties must fulfill following criteria:

Section 29C of The Representation of the People Act, 1951 has been amended to remove the obligation of political parties to keep record of the donors and report the same to the Election Commission of India (ECI) annually.

The scheme allowed individuals and domestic companies to buy n number of bonds digitally or through cheque , no limit exists on number of bonds purchased by a person being an individual or a corporate entity from the selected branches of State Bank of India. The 29 specified State Bank of India Branches are in the cities such as New Delhi, Gandhinagar, Chandigarh, Bengaluru, Bhopal, Mumbai, Lucknow, Chennai, Kolkata, and Guwahati.

First 10 days of January, April, July and October months have been specified by the government for purchasing of the electoral bonds.


  • Even before the Finance Act implemented electoral bonds, the Reserve bank of India opposed it and argued that Electoral Bonds could promote money laundering, but the central government ignored the suggestion and launched the scheme of electoral bond. RBI’s concern about money laundering was addressed by adding, Clause 11 to the electoral bond scheme. [i]The electoral bond scheme is also subject to KYC legislation by RBI. Legal and natural citizens who wish to donate to the political party of their choice must adduce to the authorized bank documentation proving their identity (PAN / TAN / Aadhar card). These features of the scheme and KYC directions were created to avoid money laundering and to preserve the audibility of funds. They are a non-trivial barrier to any money laundering risk. Irrespective of repeated warnings by the Reserve Bank of India (RBI) about the electoral bond scheme with the potential to increase the circulation of black money, money laundering, cross-border counterfeiting, and forgery were ignored by the government of Prime Minister Narendra Modi[ii], as it was more interested in preserving donor identity, the responses of the Ministry of Finance to the right to information (RTI).

  • The amendment brought through this act do not require the political parties to submit report of information of the donor to the Election Commission of India, this alters the transparency on the political funding and fundamental perception around political donations.

  • Restriction on the important information at the cost of larger pubic interest infringes the citizen’s fundamental ‘Right To Know’, which goes against very spirit of democracry.

  • These bonds assures to transparency hence do not provide details to the citizens, but these bonds for security reasons carry a hidden alphanumeric characters, visible only under ultraviolet light and invisible under naked eye , hence the said anonymity does not apply to the government of the day, which can access the donor details by demanding the data from the State Bank of India, this implies that only the taxpayers are kept in dark.

  • In the name of transparency Electoral bonds have encouraged and endorsed opacity by not only opening the floodgates of indefinite and mysterious donations but has also legitimized the illicit money in electoral and political process.

  • However, despite the bona fide object this scheme has increased black money circulation, money laundering, cross border counterfeiting and forgery. The institutions such as Reserve Bank of India(RBI), Election Commission of India(ECI), the Law Ministry and various MPs of Rajya Sabha had strongly opposed the mechanism of electoral bonds and termed it as a “bad precedent”, these objections to make the scheme less vulnerable to fraud were ignored by the government.

  • In a situation when the donations received through electoral bonds are not reported it will never be ascertained if the parties has violated the provisions of The Representation of peoples Act 1951 which prohibits the parties from taking donations from government companies and foreign sources.


From the above discussion, it is difficult to conclude whether the introduction of the Electoral bonds was a good thing or not. The question of transparency introduced in this scheme invites controversy. Political donations will become transparent through Electoral Bonds, as the government will keep registering the donations. The amount of donation allocated would be open to review by the public and this would maintain transparency in political activities. At the same time, the confidentiality of the donors who purchase donation money to donate to the eligible Political parties has created a negative effect over the Electoral Bond Scheme, as the general public would never know about who is donating and who is not.

But if the Identities are disclosed, then it will become a danger for the Donors as they might face problems from the opposite parties who they did not donate to. Government needs to examine and regularize the Electoral Bond Scheme. A regularized scheme without any biasness towards any party free from any irregularity will be deemed successful conversely if instant scheme happens to aggravate illegal acts like corruption or money laundering it will worsen the condition. While regulating any scheme the government shall keep in my the need of the nation and must ensure to cherish the very essence of democracy which lies in interest of the general public.

[i]It stipulates that the donor may only use banking channels, such as cheque or ECS, which completely preserve audibility and leave a trail, and that is why there would be no money laundering problem. [ii] A look at the correspondence between then RBI Governor Urjit Patel and then Finance Minister Arun Jaitley reveals that the central bank’s reservations regarding the scheme have been consistently overlooked by the Government. REFRENCES Ø The Indian express Ø Ø Byju’s Ias Notes


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