Demystifying Electoral Bonds: A Closer Look at Political Funding in India

Written by: Altamash Khan

In a democratic society like India, the financing of political parties has always been a subject of scrutiny and debate. The issue of transparency in political funding has often been a bone of contention, with concerns raised about the influence of money in politics. In an attempt to address these concerns, the concept of electoral bonds was introduced in India in 2017.

What are Electoral Bonds?

Electoral bonds are essentially financial instruments that citizens and corporate entities can purchase from specified branches of the State Bank of India (SBI) and donate to political parties. These bonds are akin to promissory notes, which can be encashed by registered political parties into their designated bank accounts. Unlike cash donations, electoral bonds offer a degree of anonymity to both the donor and the recipient, as the identity of the donor is not disclosed to the public or the recipient party.

How are Electoral Bonds Used by Political Parties?

Political parties in India rely heavily on funding to run their electoral campaigns, conduct rallies, and undertake various outreach activities. Electoral bonds provide a legitimate channel for receiving funds from individuals and corporations, thereby reducing the dependence on unaccounted cash donations. Moreover, electoral bonds offer a layer of confidentiality to donors, which may encourage more substantial contributions, as individuals and entities can support their preferred political party without fear of reprisal or public scrutiny.

The process of using electoral bonds is relatively straightforward. Donors purchase the bonds from authorized SBI branches using their KYC-compliant bank accounts. These bonds are available in fixed denominations ranging from ₹1,000 to ₹1 crore or more. Once purchased, the donor can then hand over the bonds to the political party of their choice, who can encash them within a specified period. The funds received through electoral bonds are deposited into the party’s designated bank account, which is disclosed to the Election Commission of India (ECI).

Supreme Court’s Intervention for Transparency

Despite the intention behind introducing electoral bonds to enhance transparency in political funding, concerns have been raised about the anonymity they provide to donors and the lack of disclosure regarding the identity of contributors. In response to petitions filed by various individuals and organizations challenging the legality of electoral bonds, the Supreme Court of India intervened to address these concerns and uphold the principles of transparency and accountability in political funding.

In April 2019, the Supreme Court passed an interim order, directing all political parties to submit details of donations received through electoral bonds to the Election Commission of India in a sealed cover by May 30, 2019. This directive aimed to ensure that the ECI had access to information about the sources of funding for political parties, even if the identities of individual donors remained confidential.

Subsequently, in April 2021, the Supreme Court delivered its judgment on the legality of electoral bonds. While upholding the validity of electoral bonds as a means of political funding, the Court made significant interventions to enhance transparency. It ruled that political parties must provide detailed information about donations received through electoral bonds, including the identity of donors, to the ECI. Additionally, it mandated that the ECI must maintain a record of all such information and make it available for public scrutiny.

This landmark judgment marked a significant step towards greater transparency in political funding in India. By requiring political parties to disclose the identity of donors contributing through electoral bonds to the Election Commission of India, the Supreme Court aimed to ensure accountability and reduce the potential for misuse of funds for nefarious purposes.

Electoral bonds represent a unique approach to political funding in India, aiming to strike a balance between the need for financial support for political parties and the imperative of transparency and accountability in democratic processes. While electoral bonds offer a degree of confidentiality to donors, recent interventions by the Supreme Court have sought to enhance transparency by requiring political parties to disclose details of donations received through electoral bonds to the Election Commission of India.

As India continues its journey towards strengthening its democratic institutions and processes, the issue of political funding will remain a focal point for reform and debate. Electoral bonds, along with the Supreme Court’s interventions, represent a significant step towards ensuring greater transparency and integrity in the funding of political parties, thereby bolstering the foundations of democracy in the country.

About the Writer:

Altamash Khan is a contributing Journalist who has completed his Journalism at the prestigious Aligarh Muslim University. He has over half a decade of experience writing on a wide range of topics, from politics and social issues to technology and Brands. In addition to his journalism work, Altamash also works as a Public Relations and Brand Strategist, helping communicate Brand messages to the World. He would love to hear your thoughts on this issue. Leave a comment below or reach out to us on social media to share your opinions.