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What Is Electoral Bond?

Electoral Bonds: A Scheme Now History in India

Electoral bonds were a system in India for funding political parties that existed from 2017 until February 15, 2024, when the Supreme Court struck it down as unconstitutional. Let’s delve into what these bonds were and why they are no longer used.

what is electoral bond?Electoral bonds were a system in India for funding political parties that existed from 2017 until February 15, 2024, when the Supreme Court struck it down as unconstitutional.


In contemporary democracies, the funding of political parties is a subject of critical importance. It directly influences the transparency, fairness, and integrity of electoral processes. Electoral bonds have emerged as a mechanism to regulate political funding in various countries, aiming to strike a balance between ensuring financial support for political parties and maintaining transparency in the political system.

In this comprehensive guide, we will delve into the concept of electoral bonds, exploring their origins, mechanisms, controversies, and implications.

Origins of Electoral Bonds:

Electoral bonds first gained prominence in India with the introduction of the Finance Bill in 2017. The primary objective behind their introduction was to cleanse the political funding system by making it more transparent and curbing the influence of black money in elections. The government proposed electoral bonds as an alternative to cash donations, aiming to increase transparency and accountability in political funding.

Mechanism of Electoral Bonds:

Electoral bonds are essentially financial instruments that resemble promissory notes. These bonds are issued by authorized banks and can be purchased by any Indian citizen or corporate entity from designated branches. The bonds are available in various denominations, ranging from as low as Rs. 1,000 to as high as Rs. 1 crore or more.

Concept and Functioning

Electoral bonds were essentially bearer bonds, similar to cash, that could be purchased by individuals or companies from designated branches of the State Bank of India (SBI). These bonds came in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh, and Rs. 1 crore. People could buy them anonymously and donate them to any eligible political party.

Eligibility and Process

Only political parties registered under the Representation of the People Act, 1951, and having secured at least 1% of the votes polled in the previous general election could receive these bonds. The bonds had a validity of 15 days, and eligible parties could encash them through their authorized bank accounts.

The key features of electoral bonds include:

  1. Anonymity: One of the significant aspects of electoral bonds is that they maintain the anonymity of the donor. The identity of the purchaser is known only to the issuing bank, ensuring confidentiality and preventing victimization of donors based on their political affiliations.

  2. Transparency: While the identity of the donor remains confidential, the details of the bonds purchased are recorded by the issuing bank and shared with the Reserve Bank of India (RBI). This mechanism aims to bring transparency to political funding by providing a trail of donations.

  3. Validity: Electoral bonds have a specified validity period during which they can be used to make donations to registered political parties. If not redeemed within the stipulated timeframe, the bonds become invalid.

  4. Accountability: Political parties are required to deposit the electoral bonds in designated bank accounts within a prescribed time frame. This ensures that the funds received through electoral bonds are accounted for and can be audited by relevant authorities.

Controversies Surrounding Electoral Bonds:

Despite the government’s intentions to reform political funding through electoral bonds, the mechanism has been mired in controversies and criticisms. Some of the major controversies include:

  1. Lack of Transparency: Critics argue that electoral bonds fail to achieve the desired level of transparency in political funding. While the details of bond purchases are known to the issuing bank and the RBI, the identity of the donors remains undisclosed to the public, raising concerns about potential misuse and lack of accountability.

  2. Potential for Money Laundering: There are concerns that electoral bonds could be misused for money laundering or channeling illicit funds into the political system. The anonymity provided by electoral bonds makes it difficult to track the original source of funds, creating loopholes that could be exploited by vested interests.

  3. Influence of Corporates: Critics also raise concerns about the influence of corporate entities in political funding through electoral bonds. Since both individuals and corporations can purchase electoral bonds, there is a risk that corporate interests may unduly influence political parties, compromising the democratic process.

  4. Impact on Level Playing Field: The introduction of electoral bonds has sparked debates about their impact on creating a level playing field for political parties. Some argue that larger and wealthier parties may have an advantage in attracting funding through electoral bonds, thereby skewing the electoral process in their favor.

  5. Lack of Public Scrutiny: The secrecy surrounding electoral bonds undermines the principle of public scrutiny in a democracy. Without adequate disclosure of donors’ identities, citizens are unable to assess the potential conflicts of interest or undue influences on political parties.

Implications of Electoral Bonds:

Despite the controversies surrounding electoral bonds, they have significant implications for political funding and democratic governance:

  1. Encouraging Formalization: Electoral bonds encourage formal channels of political funding by discouraging cash donations, which are often unaccounted for and prone to misuse. By promoting transactions through banking channels, electoral bonds contribute to the formalization of the economy and enhance financial transparency.

  2. Balancing Anonymity and Accountability: Electoral bonds strike a delicate balance between maintaining the anonymity of donors and ensuring accountability in political funding. While the anonymity protects donors from potential repercussions, the requirement for political parties to declare and account for the bonds enhances transparency and accountability.

  3. Addressing Black Money: The introduction of electoral bonds aims to curb the influence of black money in politics by promoting transparent and traceable transactions. By encouraging donations through legitimate financial instruments, electoral bonds contribute to the broader objective of combating corruption and illicit financial activities.

  4. Legal Framework for Political Funding: Electoral bonds provide a legal framework for political funding, offering a structured mechanism for parties to receive financial support from donors. While there are ongoing debates about the efficacy of this framework, electoral bonds represent a step towards formalizing political finance regulations.

  5. Reforming Political Funding: The controversies surrounding electoral bonds have prompted discussions about the need for further reforms in political funding. Whether through increased transparency measures, stricter regulations, or alternative mechanisms, electoral bonds have catalyzed a broader dialogue on enhancing the integrity of electoral processes.

Controversy and Abolition

The anonymity offered by electoral bonds was a major point of contention. Critics argued that it lacked transparency and could be misused for undisclosed influences on political parties. This lack of transparency violated the right of voters to know who financed the parties they were electing.

After years of challenges, the Supreme Court finally ruled in February 2024 that the electoral bond scheme was unconstitutional. The court directed the State Bank of India to share donor and recipient details with the Election Commission of India, which in turn, was instructed to publish this information on its website.

Current Situation

Following the Supreme Court’s decision, the electoral bond scheme is no longer operational in India. The future of political party funding in the country is now a topic of debate and likely legislative reform.


Electoral bonds represent a novel approach to regulating political funding, aiming to balance the need for financial support to political parties with the imperative of transparency and accountability. While they have sparked controversies and criticisms, electoral bonds have also catalyzed discussions about the reform of political finance systems and the broader principles of democratic governance.

As countries continue to grapple with the challenges of ensuring integrity in electoral processes, electoral bonds remain a subject of scrutiny and debate. Whether they evolve to address the concerns raised by critics or pave the way for alternative mechanisms, electoral bonds signify a critical juncture in the ongoing quest for fair, transparent, and accountable political systems.