What Are Electoral Bonds?

Introduction

Political funding has long been a sensitive issue in India, often linked to concerns around transparency, accountability, and the role of money in elections. To address some of these challenges, the Government of India introduced electoral bonds in 2018 as a structured instrument for making political donations through banking channels.

This article explains the meaning of electoral bonds, their features, working, timeline, criticism, and impact on Indian democracy, along with the Supreme Court’s landmark verdict in 2024.

What Are Electoral Bonds?

Electoral bonds are financial instruments issued by the State Bank of India (SBI) that allow individuals and companies to donate money to political parties. They function like promissory notes that can be purchased and then redeemed by eligible political parties through their verified bank accounts.

In simple terms: electoral bonds are a mechanism to fund political parties through banking channels instead of cash, with the aim of reducing black money in politics.

Features of Electoral Bonds

Issuer – Issued exclusively by SBI.

Eligibility to Purchase – Any Indian citizen or company incorporated in India.

Denominations – Available in ₹1,000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹1 crore.

Validity – 15 days from the date of issue.

Eligible Parties – Registered under Section 29A of the Representation of the People Act, 1951, with at least 1% vote share in the last Lok Sabha or Assembly elections.

Redemption – Through the political party’s verified SBI account.

How It Works?

Timeline of Electoral Bonds in India

2017 – Announced in Union Budget.

2018 – Officially notified and implemented.

2019 onwards – Intense debates on transparency and anonymity.

2024 – Supreme Court declared the scheme unconstitutional.

How Do Electoral Bonds Work?

A donor purchases electoral bonds from SBI during designated issuance windows.

The donor hands over the bond to a political party of choice.

The party redeems the bond through its verified SBI account.

SBI credits the value to the party’s account.

This process channels political donations through the formal banking system instead of cash transactions.

Advantages of Electoral Bonds

Reduced cash-based political donations.

Promoted donations through legal, regulated banking channels.

Enabled both individuals and corporates to participate in funding.

Large denominations made high-value contributions possible.

Criticism of Electoral Bonds

Despite their intent, electoral bonds drew criticism:

Anonymity of Donors – Public could not identify contributors.

Unequal Advantage – Ruling parties were perceived to have indirect access to donor data.

Transparency Concerns – Limited disclosure of funding information to citizens.

Supreme Court Verdict on Electoral Bonds

In February 2024, the Supreme Court of India struck down the electoral bond scheme, ruling it unconstitutional.

The Court held that donor anonymity violated the right to information under Article 19(1)(a).

It emphasized that transparency in political funding is essential for democratic integrity.

The judgment has reshaped political funding in India, requiring alternative mechanisms for clean and accountable financing.

Impact of Electoral Bonds on Indian Democracy

Positive Impact

Encouraged donations via regulated banking channels.

Reduced cash-based political funding.

Negative Impact

Donor anonymity reduced transparency for citizens.

Concerns of disproportionate benefits to ruling parties.

Future Outlook

With the scheme now struck down, the government may consider new reforms to balance clean funding with transparency in political donations.

FAQs on Electoral Bonds

Q1. What is electoral bonds in India?

Financial instruments introduced in 2018 to fund political parties through SBI.

Q2. Who could buy electoral bonds?

Any Indian citizen or company incorporated in India.

Q3. Which political parties were eligible?

Parties registered under Section 29A of the Representation of the People Act, 1951, with at least 1% vote share.

Q4. What was the validity of electoral bonds?

15 days from the date of issue.

Q5. Why did the Supreme Court strike down electoral bonds?

Due to lack of transparency and donor anonymity.

Q6. Are electoral bonds still available?

No. Since the 2024 Supreme Court verdict, electoral bonds are no longer issued.

Conclusion

Electoral bonds were introduced as a reform to reduce unaccounted political donations and strengthen electoral transparency. While they had merits like channeling funds through banking systems, the anonymity of donors raised serious concerns.

With the Supreme Court’s 2024 judgment striking down the scheme, India stands at a turning point in shaping a more transparent and accountable framework for political funding.

Disclaimer

This blog is intended solely for educational and informational purposes. Electoral bonds discussed herein are explained for general understanding of political funding in India and should not be interpreted as investment advice. BondScanner, as a SEBI-registered Online Bond Platform Provider (OBPP), does not engage in political financing or recommendations.

Readers are encouraged to rely on official government and regulatory sources for updates on electoral funding frameworks.