You must be familiar with the term “Electoral Bonds”. It’s been a part of rounds of discussions in the last few months. Let’s learn what significance the Electoral Bonds hold in our existing political funding environment..

Being the largest democracy in the world, elections and political parties are a fundamental feature of Indian democracy.  Elections cost money as parties run offices throughout the country. Also, there are staff salaries, travelling expenses, and other miscellaneous expenditures.  These expenditures go into hundreds of millions with no proper and transparent funding mechanism of the political system.

The conventional system of political funding is to rely on donations from a variety of sources from political workers, followers, business people and even industrialists. The funding in the political system means to take donations in cash and also to undertake these expenditures in cash. The sources of funding have always been anonymous or pseudonymous.  The amount of money was never disclosed.

According to the Association of Democratic reforms report, 69% of the income of the political parties is from unknown sources not just this, the remaining 31% income is from the sources that the parties declare to the income tax department.

ADR report on political party funding

In his budget speech for the year 2017-2018, The Union Finance Minister, Shri Arun Jaitley had announced Electoral Bonds. An electoral bond is a financial instrument for making donations to political parties. A donor can purchase these bonds from the branches of SBI in the multiples of one thousand, ten thousand, 1 Lakh and 1 Crore.

Till today people didn’t get any precise information on the source from which the political parties got their funding and how do they spend them. The share of anonymous funding has always been high and the scheme of electoral bonds is meant to change this system. The purpose is to establish total clean money and transparency in the current system. These bonds are like Promissory Notes. You’ll be given a 10 days period in every quarter (January April, July and October) to buy them

Why are the electoral bonds useful?

To ensure that the funds being collected by the political parties are clean money, the amount of cash donation is capped at Rs. 2,000.

Information of both the donor and receiver to the RBI. The bonds can be encashed by a political party only through a designated bank account with an authorized bank for which every political party has to submit details of one bank account to the Election Commission and the bonds can be encashed only in that account.

They will be valid only for 15 days during which it can be used to make a donation only to certain political parties. The payee needs to fulfill the required KYC protocols at the banks.

To get the advantage from the electoral bonds scheme, the political parties need to be registered with the Election Commission and should have secured at least 1% of the votes in the most recent General Election. This will be a measure to push out the non-serious candidates.

What are the related concerns?

The budget does not provide for the scrutinization of accounts of the political parties. Hence, there is no complete transparency.

Any potential donor doesn’t have to worry about donating to the party in power but will have to worry about donating to party in opposition. Any party in power wants to know the donors of the opposition and they may face some trouble and this scares the donors.

Despite the electoral bonds, there is no limitation on giving cash to the political parties. Even at present, the amount being paid as a donation is shown less than the amount actually given to the political parties. To some extent black money will be reduced as a part of money will come through banks. But as far as corruption is concerned, it is still difficult to keep a check on it.

There are only three pieces of the given information- the designated bank the life of the bonds and the denominations; which does not help. Electoral bonds will continue to be designed to make the funding more opaque that will only bring more black money in the political system.

Introduction of Electoral Bonds shows the intention of the government to move towards transparency in political funding environment. The government’s idea of maintaining anonymity is well understood and accepted but the amount of money received by the political parties is important to be disclosed to voters to ensure free and fair democracy. The stated mission of electoral bonds is to level down opaqueness in political funding in the country. The information on how much funding a political party gets and how does it spend it has never been in public domain. Nothing is going to get changed in a hurry. Let’s just see how much time it takes

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  1. […] practices to win the elections, will now be discouraged to do the same. Also, now when we have the electoral bonds in function that aim to instil transparency in the political funding, the collected money will be […]


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