Electoral Bonds: Understanding the Anonymity Concerns in India's Political Financing

7 Nov 2023  Read 5910 Views

Imagine being able to support your favorite political party without anyone knowing it was you. Sounds intriguing, right? This can be done with the help of electoral bonds. This might sound complicated, but they're like a hidden key to political donations in India. Ever since the electoral bonds scheme was introduced in 2018, more than half, or 57%, of the funds extended through bonds have gone to the BJP. 🤯

So, buckle up as we explore the dynamics of electoral bonds, its examples, essentials and how they work. Read until the end & clarify your concept!

What are Electoral Bonds?

Electoral bonds are financial instruments introduced by the GoI to facilitate transparent political funding. These bonds act as a method for individuals and corporations to make donations to registered political parties. Available in specific denominations, electoral bonds can be purchased from authorized banks, and the funds can be used by political parties for various activities, including election-related expenses.

Let's understand this concept with the help of its features:

  • Ensuring Transparency: Electoral bonds help political parties collect clean and accounted-for funds.
  • Eligible Buyers: Any Indian citizen or entity established in India can buy electoral bonds. Individuals can buy them alone or jointly with others.
  • Eligible Recipients: Only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing at least 1% of the votes in the last General Election can receive electoral bonds.
  • Authorized Banks: Electoral bonds can only be encashed by eligible political parties through their accounts with authorized banks. The State Bank of India (SBI) is one authorized bank, with 29 branches handling electoral bonds.
  • Validity Period: An electoral bond validates 15 calendar days from the issue date. It cannot be used for payment if deposited after the validity period.
  • Prompt Crediting: When an eligible political party deposits an electoral bond in its account, it gets credited on the same day.
  • Cap of Electoral Bonds: There is no specific cap. Electoral bonds are available in different denominations, including ₹ 1,000, ₹ 10,000, ₹ 1 lakh, ₹ 10 lakh, and ₹ 1 crore. They can be purchased from specified SBI branches.
Mint Explainer: Demystifying the electoral bonds scheme | Mint
Source: Mint

Can you buy Electoral Bonds with cash?

No, you cannot buy electoral bonds with cash in India. Electoral bonds are typically purchased through digital payment methods or by cheque. This requirement is in place to ensure transparency and traceability of political donations. Alongside, let's discuss some basic features of electoral bonds:

  • Notified banks issue these bonds.
  • The donor may approach these banks and purchase the bonds.
  • The donor can pay for the bonds using a cheque or digital methods (no cash) to keep your identity secret, especially if you're a businessman.
  • The donor donates these bonds to the political party.
  • The political party has to encash it into the account, which is registered with the Election Commission of India.

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Basic Example of Electoral Bonds

Let's take an example: Meet Mr A, an Indian citizen who wants to support his favourite political party, the "Unity Party." He decided to donate ₹ 10,000 to the party using electoral bonds.

  1. Choosing the Bank: Mr A goes to a bank authorized to issue electoral bonds, like the State Bank of India.
  2. Buying the Bonds: He tells the bank he wants to purchase electoral bonds worth ₹ 10,000. Mr A can pay for these bonds through a cheque or digital payment, which protects his identity.
  3. Receiving the Bonds: After making the payment, the bank gives Mr A electoral bonds worth ₹ 10,000. These bonds are like certificates that he can use to donate.
  4. Donating to the Political Party: Mr A hands over these bonds to the Unity Party. They accept the bonds and keep them securely.
  5. Encashing by the Party: The Unity Party takes the bonds and deposits them into their bank account, which is registered with the Election Commission of India. This is how they receive the money that Mr A donated.

In this way, A can support the Unity Party securely and confidentially by using electoral bonds.

Electoral Bonds in India - Meaning, How they work, Features | Dezerv.in
Source: Dezerv

Under what scheme Electoral Bonds were introduced?

The Electoral Bond Scheme of 2018 was introduced in India to enable political donations to be made to political parties through a system of electoral bonds. Under this scheme, electoral bonds were introduced as financial instruments that individuals and companies could purchase from authorized branches of the State Bank of India (SBI) using a KYC-compliant account.

Challenges Concerning Electoral Bonds

Even though the Electoral Bond Scheme acts as a measure against the old under-the-table donations since bonds are through cheques and digital paper trails of transactions, there are many key provisions of the scheme that are causes of concern.

1. Anonymity: One primary concern is the lack of obligation for donors, whether individuals or corporations, to disclose the source of their donations. This anonymity raises questions about transparency in political financing.

2. Shareholder Confusion: This lack of transparency extends to political parties no longer being required to declare which companies they receive donations from. Shareholders may be in the dark about where their invested money is going.

3. Dubious Funds:

  • Corporate Donation Cap: The removal of the 7.5% cap for corporate donations has raised eyebrows. This change allowed corporations to contribute unlimited amounts without restraint.
  • Profit and Loss Secrecy: There is no longer a need for companies to reveal their political contributions in their financial statements. This liberty can make it difficult to trace the flow of funds and their purposes.
  • Three-Year Rule: The requirement that companies must exist for at least three years before making political contributions has come under criticism. This rule allows struggling or even shell companies to donate without revealing their identity.

4. Information Asymmetry: Since electoral bonds are purchased through the State Bank of India (SBI), the government always has access to information about the donors. This information asymmetry can potentially favour the political party in power at the time.

5. Transparency Requests: The Election Commission of India has recommended that the limit for reporting donations be reduced from ₹ 20,000 to ₹ 2,000. However, the government has instead reduced the maximum allowable cash contribution to ₹ 2,000.

6. Round-Trip for Business: There's concern that electoral bonds might offer a convenient channel for businesses to route their cash, especially from tax havens to political parties. This could be seen as an exchange for favours or advantages granted in return.


In conclusion, the topic of electoral bonds in India has been a matter of great debate and scrutiny since their introduction in 2018. While electoral bonds were introduced to bring transparency to political funding, the anonymity feature has raised concerns about the source of funding and the potential for corruption. Additionally, there have been concerns about the majority of electoral bonds going to one party, which some argue could lead to unequal representation and a lack of fairness in the political system.  

Are these bonds a good or bad thing for political parties? What's the deal with so much money going to one party? Share your thoughts below.

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About the Author: Kakoli Nath | 275 Post(s)

She is a Legal Content Manager at Finology Legal! With a Masters in Intellectual Property Rights (IPR), a BBA.LL.B from ITM University, and patent analyst training from IIPTA, she truly specializes in her field. Her passion for IPR and Criminal laws is evident from her advanced certification in Forensic Psychology and Criminal Profiling from IFS, Pune.

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