Q) The government should take into account the distorting effect of the electoral bonds scheme and take measures to remove the provisions in the scheme that leaves scope for its misuse. Discuss.

Why this question?

Important part of GS Paper-II.

Key demand of the Question 

Discuss the purpose of electoral bonds and the concerns related to it.


Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.


Start by giving a context of the question.


In the first part, highlight the major purpose of the electoral bonds and why it was introduced by the government.

In the next part, highlight the major concerns related to it and why it has been surrounded by controversies.


Conclude with a way forward.

Model Answer


Electoral bonds are instruments or securities that are used for the purpose of donating funds to political parties. It was introduced in India in 2018. They are based on the lines of bearer bonds or promissory notes wherein the issuer (bank) is the custodian and pays the one who holds the bonds (political party).

Significance of Electoral Bonds 

  1. They are aimed at rooting out the current system of largely anonymous cash donations made to political parties.
  2. They are made to curb the practice of using black money for electoral funding. 
  3. Since the donor buys electoral bonds after furnishing KYC details to the bank, it is a more transparent tool for electoral funding than cash.
  4. It protects the donors against any post-poll intimidation or harassment by political opponents, as their anonymity is assured. 
  5. Since the validity of these bonds is 15 days from the date of their issue, the chances of misuse are reduced. 
  6. The bonds also offer tax advantage to donors, thus making them an attractive tool for political donations.

Concerns related to Electoral Bonds 

  1. The bonds that were introduced to ensure transparency have promoted opacity since the ordinary citizens do not know who is donating how much money to which political party, and the bonds increase the anonymity of political donations.
  2. It does not allow the Election Commission of India to check violation of provisions in the Representation of the People Act, as any donation received by a political party through an electoral bond has been taken out of the ambit of reporting under the Contribution Report.
  3. The amendment of 2018 to the FCRA allows political parties to receive funding from foreign companies with a majority stake in Indian companies. It can lead to Indian policies being influenced by foreign companies.
  4. Elimination of a cap of 7.5% on corporate donations, elimination of requirement to reveal political contributions in profit and loss statements and also the elimination of the provision that a corporation must be three years in existence, undercuts the intent of the scheme.
  5. It conceals from public scrutiny the identity of the corporates and moneybags, thus defeating the objective of transparency.
  6. Since these bonds assure secrecy and anonymity, it can encourage cases of round tripping and tax evasion. 
  7. Sale of electoral bonds had become an avenue for shell corporations and entities to park illicit money and even proceeds of bribes with political parties.
  8. Data obtained through RTI application has shown that illegal sale windows have been opened in the past to benefit certain political parties.

Way Forward 

  • Switching to complete digital transactions for electoral funding.
  • Donations above a certain limit can be made public to break the corporate-politico nexus.
  • Political parties should be brought under the ambit of RTI.
  • Establish a national electoral fund where donors contribute and funds are distributed among different parties.
  • Audits of the accounts belonging to the political parties should be conducted on a regular basis.
  • Shell companies should be removed from the rolls of the Ministry of Corporate Affairs by either striking off by Registrar of Companies or by voluntary strike offs.