Implications of electoral bonds

The Electoral Bond Scheme was launched with a view to bring transparency in the prevailing culture of political sponsorship, but in the recent few days a lot of controversy has arisen about it. Significantly, a recent RTI reply revealed that not only the Election Commission (EC) but also the Reserve Bank of India (RBI) had raised objections to the process of electoral bonds and the then Governor of RBI in this context, the then Law Minister A letter was also written to the government, but the Government passed the objections of the RBI and EC, and the scheme was passed in the Lok Sabha as a Finance Bill.

  • The RBI governor said in his letter that the scheme is not transparent and not only weakens the money laundering bill but also violates the basic principles of central banking practices.
  • At the same time, the RBI also feared that the scheme would also allow companies to buy bonds that are incurring losses, which creates the possibility of setting up shell companies.
  • In 2018, the Election Commission filed an affidavit in the Supreme Court stating that the scheme could have far-reaching dangerous consequences.
  • The EC believed that this would not only end transparency but would further weaken the electoral bond finance system.

Indian elections and corruption

  • Elections are called the mahaparv of democracy and the foundation of vibrant democracy of every country rests on free and fair elections to be held there. It is a citizen’s prerogative to participate in electoral processes, although it cannot be denied that this process is completely affected by corruption in the country. The huge cost of elections in the country is the biggest problem of the Indian election system. According to the report of the National Commission set up to review the functioning of the Constitution, the high cost of elections is largely responsible for promoting corruption in the public sector. Some experts also refer to the criminalization of unaccounted money spent in elections or the source of electoral funding, making lawmakers in the country the only lawmakers. Sometimes this money is given in lieu of security, while in many cases it is also received from large business groups who want to profit from this type of investment. The use of black money in Indian elections has also come up from time to time. Significantly, it not only promotes money laundering, but it can also have serious economic and social consequences. It also promotes corruption and crony capitalism.

Key provisions related to political funding

  • Some provisions have been made in different enactments aimed at regulating political or electoral funding in India.
  • Under Section 29 (C) of the Representation of the People Act, 1951, it has been made mandatory for political parties to declare funding of more than Rs. 20,000.
  • As per Section 2 (e) of the Foreign Contribution (Regulation) Act, 1976, it is completely prohibited to accept contributions from any foreign source. Penalties have also been made in this context under the Act.
  • Section 77 of the Representation of the People Act, 1951 defines the electoral expenses of political parties and includes the expenses incurred by the candidate or agent of that party.
electoral bond

What are electoral bonds?

  • If we talk about bonds then it is a debt security. The electoral bond was first mentioned in the 2017 general budget.
  • Actually, it was said that RBI will issue a type of bond and whoever wants to donate to a political party, will first buy the bond from the bank and then can give the bond to any political party to whom it wants to donate. is.
  • The political parties will sell these electoral bonds to the authorized bank and during the validity period the amount will be deposited in the bank accounts of political parties in proportion to the purchase of the bond.
  • Significantly, the electoral bond will be like a promissory note, on which no interest will be paid. It is noteworthy that election bonds can be purchased only through check or e-payment.
  • Any citizen and corporate body in India is allowed to buy electoral bonds, they can buy such bonds from government notified branches which are sold for 10 days in January, April, July and October.
political parties

Electoral bond scheme

  • The Electoral Bond Scheme was notified by the government in the year 2018.
  • Major provisions of the scheme
  • Electoral bonds can be purchased by every citizen of India.
  • There is no limit to the investment by an individual in an election bond.
  • No interest will be paid on the amount invested in the election bond.
  • It is necessary to encash the electoral bond within fifteen days from the date of issue.
  • Electoral bonds are not tradable.
  • Only those political parties which are registered under Section 29 (A) of the Representation of the People Act, 1951 and are eligible to get at least 1% of the votes in the last general election.
  • The government has authorized the State Bank of India (SBI) to issue the electoral bond.
  • The election bond will be valid for fifteen calendar days from the date of issue.
representation of the people act

Why is electoral bond important?

  • Be aware that India is the largest democracy in the world. However, despite strengthening various institutions for the last seven decades, India has not been able to develop a transparent political funding system.
  • The traditional system of political donations depends on grants. These grants mainly come from the sources of political workers and industrialists, big and small.
  • Whatever election funding was received under the traditional system was given mainly in cash, which greatly increased the chances of black money. But since the electoral bond can be purchased only through check or e-payment under the current system, the black money concerns are over.
  • The purpose of the electoral bond is to stop the trend of cash and secret donations to political parties.
  • The duration of the electoral bond has been kept at a maximum of 15 days with the main objective of curbing its misuse, as well as curbing the use of black money in providing finance to political parties.
  • Through this, transparency can be ensured, as the bond buyer will have to mention it in their balance sheet as well.

Due to electoral bond dispute


  • Under this arrangement neither the name of the fund teller is announced nor the name of the fund taker. This system disregards the fundamental constitutional principle of freedom of political information. Significantly, this principle is an essential element of Article 19 (1) (A) of the Constitution.
  • It also ignores the basic principle of transparency in political finance. This system helps to hide the identity of corporates who make huge grants to political parties especially the ruling parties for political gains.
  • Many critics argue that since electoral bonds are bought only through SBI, the government can monitor them. It is noteworthy that several media institutions had also confirmed this.
  • There is no condition to receive foreign funding through electoral bonds, so that any financially bankrupt company can also donate money. Under these circumstances, it appears at first that this plan has not really succeeded in achieving its initial objective.
  • As part of the electoral bond process, the Election Commission cannot monitor these, which impedes the objective of free and fair elections.
  • Additionally, the pre-condition of being in existence at least three years prior to donating to a donor company has also been removed. This condition prevented black money from being used in politics through shell companies.

Is electoral bond a threat to democracy?

Experts believe that electoral bonds have a long-term impact on democracy. Many researchers doing research on this subject say that secret information related to the electoral bond process goes to the government along with the enforcement agency, but the public has no information in this context. Due to which the question becomes important that how can a good democracy be created under the shadow of secrecy? It has often been seen that most of the money gets to the ruling party through the electoral bond process. It is noteworthy that out of the total electoral bond purchased in the year 2018, about 95% went to the account of one party.

Road ahead

  • Various commissions, including the Election Commission, have given detailed recommendations on measures to improve this process. But none of them have been implemented yet.
  • It is necessary to study various international models regarding electoral funding and the scheme should be improved according to the Indian environment. Also, it should be kept open for discussions and feedback.
  • In this context, the following two principles can be followed:
  • Funding should be completely transparent.
  • Political parties should be brought under RTI.
  • Funding and spending limits should be set. Also, special punitive provisions should be made for those who do not follow the rules.

The conclusion

The country needs such voter awareness campaigns that can inspire the citizens of India to demand change. If the voters start rejecting those candidates and parties who bribe or bribe them, the democracy of the country itself will rise to a level.

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