If a democracy is to thrive, the role of money in influencing politics ought to be limited. In many advanced countries, elections are funded publicly so as to guarantee a somewhat level playing field.


  • An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
    • The citizen or corporate can then donate the same to any eligible political party of his/her choice.
    • The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
    • An individual or party will be allowed to purchase these bonds digitally or through cheque.
  • A bearer instrument does not carry any information about the buyer or payee and the holder of the instrument (which is the political party) is presumed to be its owner.
  • The electoral bonds were introduced with the Finance Bill (2017).
    • The bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore (the range of a bond is between Rs 1,000 to Rs 1 crore). These would be available at some branches of SBI.
  • These can be purchased by individuals and companies who have to disclose their identity through know your customer (KYC) norms to SBI, while political parties can encash these bonds within 15 days only in their specified bank accounts.
  • Only those parties, which have got 1% of all votes polled in the last Lok Sabha or state assembly polls, are eligible for funding through these bonds.
    • This makes it possible to give political contributions through a legitimate channel with tax-paid funds, while who gave how much to which party remains anonymous.
  • Benefits of the scheme till date: for both the principal political parties, it seems that the quantum of political donations channelised through cash donations/non-identifiable sources has decreased substantially.
    • Instead, today more funds are channeled through the formal banking system. This was not the case with the earlier system in which half of the political donations were not traceable as they were made in cash form.


  • Removal of a cap on corporate donations: removal of a cap on corporate donations that existed earlier that was 7.5% of three-year average net profit enables businesses to make unlimited political donations without disclosing the recipient’s name
  • Legalizes political corruption: there is lack of transparency as we do not know who is giving what to whom and what they are getting in return and only the government, through ministries, has access to this information.
  • Transparency: It is important for a functioning democracy to have a transparent system of political funding. The concerns have been raised about anonymous donations which challenges the very core of our democratic functioning.
    • According to a report, 70% of the income of the political parties was coming through unknown sources, including electoral bonds.
    • The report also said that such anonymous donations become possible since the political parties do not have to reveal names of individuals or organisations giving less than Rs 20,000 and neither do they have to disclose the names of those donating through electoral bonds.
  • Anonymity: Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.
    • Hence, parties do not have to disclose details of those contributing by way of electoral bonds in their contribution reports filed mandatorily with the Election Commission every year.
    • This means the voters would not know which individual, company, or organisation has funded which party, and to what extent.
  • Stand of the election commission: The Election Commission, in its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in 2017, had objected to the amendments in the Representation of the People (RP) Act, which exempt political parties from disclosing donations received through electoral bonds.
    • Section 29(b) of the RP Act prohibits the political parties from taking donations from government companies and foreign sources.


The solution to political funding as suggested by experts is setting up a national election fund where corporate houses and individual donors can contribute with a 100% tax-free fund. The Election Commission could be given the task of overseeing it. The money can then be divided among political parties mostly in kind and a part in cash.

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