2 minPolitical Concept
Political Concept

Electoral Bonds

What is Electoral Bonds?

Electoral Bonds were financial instruments introduced by the Indian government to facilitate donations to political parties. They were bearer instruments similar to promissory notes that could be purchased from authorized banks and donated anonymously to political parties, who could then redeem them for cash.

Historical Background

Introduced in 2017 through amendments to various laws, including the Reserve Bank of India Act, the Representation of the People Act, and the Income Tax Act. The stated objective was to promote transparency in political funding by reducing reliance on cash donations. However, the scheme faced criticism for its lack of transparency and potential for misuse.

Key Points

8 points
  • 1.

    Issued by State Bank of India (SBI) in denominations ranging from Rs 1,000 to Rs 1 crore.

  • 2.

    Purchasers could be individuals, companies, firms, or any association of persons.

  • 3.

    Bonds were valid for 15 days from the date of issue.

  • 4.

    Political parties registered under Section 29A of the Representation of the People Act, 1951 and having secured at least 1% of the votes polled in the last election were eligible to receive donations through electoral bonds.

  • 5.

    Donors' identities were kept anonymous from the public, but known to the issuing bank.

  • 6.

    The scheme allowed for unlimited corporate donations to political parties.

  • 7.

    Critics argued that the scheme lacked transparency and could facilitate quid pro quo arrangements between donors and political parties.

  • 8.

    The scheme was challenged in the Supreme Court of India on grounds of violating the right to information and promoting corruption.

Visual Insights

Electoral Bonds: Key Features and Concerns

Mind map outlining the key features, benefits, criticisms, and legal aspects of Electoral Bonds in India.

Electoral Bonds

  • ●Key Features
  • ●Benefits (Govt. View)
  • ●Criticisms
  • ●Legal Aspects

Recent Developments

5 developments
→

Supreme Court declared the Electoral Bond Scheme unconstitutional in February 2024.

→

The Court directed the SBI to disclose the names of donors and recipient political parties.

→

The ruling raised questions about the future of political funding in India and the need for alternative mechanisms.

→

Debate on the potential impact of the ruling on electoral outcomes and political dynamics.

→

Focus shifted to exploring more transparent and accountable methods of political funding.

This Concept in News

1 topics

Supreme Court Seeks Response on Capping Political Parties' Election Expenses

27 Feb 2026

The news underscores the ongoing debate about the effectiveness and fairness of Electoral Bonds. It highlights the concern that without limits on overall party spending, the anonymity provided by Electoral Bonds can exacerbate the problem of money influencing elections. The Supreme Court's willingness to examine expenditure caps suggests a growing recognition of the need to address unregulated political funding. This news challenges the initial premise of Electoral Bonds as a tool for transparency, revealing instead its potential to shield large donors and create an uneven playing field. Understanding Electoral Bonds is crucial for analyzing the complexities of election financing, the role of money in politics, and the ongoing efforts to ensure free and fair elections. The future of Electoral Bonds may depend on the Supreme Court's decisions regarding expenditure caps and the broader debate on transparency in political funding.

Source Topic

Supreme Court Seeks Response on Capping Political Parties' Election Expenses

Polity & Governance

UPSC Relevance

Crucial for UPSC GS Paper 2 (Polity & Governance), frequently asked in both Prelims and Mains. Understanding the scheme, its implications, and the Supreme Court's ruling is essential.

Electoral Bonds: Key Features and Concerns

Mind map outlining the key features, benefits, criticisms, and legal aspects of Electoral Bonds in India.

Electoral Bonds

Anonymous Donations, SBI Issuance

Reduced Cash Donations

Anonymity, Potential for Misuse

Challenges to Validity

Connections
Key Features→Benefits (Govt. View)
Key Features→Criticisms
Criticisms→Legal Aspects

This Concept in News

1 news topics

1

Supreme Court Seeks Response on Capping Political Parties' Election Expenses

27 February 2026

The news underscores the ongoing debate about the effectiveness and fairness of Electoral Bonds. It highlights the concern that without limits on overall party spending, the anonymity provided by Electoral Bonds can exacerbate the problem of money influencing elections. The Supreme Court's willingness to examine expenditure caps suggests a growing recognition of the need to address unregulated political funding. This news challenges the initial premise of Electoral Bonds as a tool for transparency, revealing instead its potential to shield large donors and create an uneven playing field. Understanding Electoral Bonds is crucial for analyzing the complexities of election financing, the role of money in politics, and the ongoing efforts to ensure free and fair elections. The future of Electoral Bonds may depend on the Supreme Court's decisions regarding expenditure caps and the broader debate on transparency in political funding.