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Electoral Bonds: Transparency in political party funding is essential in the interest of democracy

If free and fair elections have to be conducted in the country, in the interest of democracy, people must be made aware of the names of the donors who fund political parties they vote for.

By Poonam Agarwal
New Update


Since the BJP-led government introduced the electoral bonds scheme in 2017, controversies have surrounded it. The party and the government continue to face criticism for making the process of political party funding non-transparent in the world’s largest democracy.

Some of the most important institutions in India, like the Election Commission of India (ECI), Reserve Bank of India (RBI) along with the State Bank of India (SBI), have since raised questions about the opacity of the scheme.

The former Finance Minister, late Arun Jaitley, introduced the scheme claiming the bonds would keep the donor’s identity anonymous and channel political funding through banking routes. But both these claims were eventually debunked. There have been numerous reports and exposes in the media on how this scheme affects our elections and democracy.

Electoral bonds, which look like promissory notes, carry a unique alphanumeric code that is not visible to the naked eye and only under Ultra Violet (UV) light. The ECI objected to the electoral bonds scheme in 2017 in a letter to the Law Ministry and filed an affidavit in 2019 in the Supreme Court arguing that it makes political funding murky, potentially allowing black money and foreign funding into the Indian political ecosystem.

Taking forward the EC’s argument, the former Reserve Bank of India (RBI) Governor Urjit Patel wrote two letters to the Finance Ministry in September 2017, strongly objecting to the issuance of bonds in a “scrip form”, citing a risk of money laundering.

Patel’s letter accessed through Right to Information (RTI) states: “The issue of EBs (electoral bonds) in scrip (physical) form is fraught with serious risk of money laundering... If RBI agrees to issue EBs in scrip form, it will be accused of acquiescing in the process in spite of the risk that it would almost inevitably result in money laundering.”

Patel insisted on issuing electoral bonds in a digital as opposed to a “scrip form”. But his concerns were overruled, and bonds started selling in March 2018.

A comprehensive petition challenging the electoral bonds scheme was filed in the Supreme Court by two NGOs – Common Cause and the Association for Democratic Reforms (ADR), which has been pending before the apex court since 2019.

In April 2022, advocate Prashant Bhushan mentioned the matter in the Supreme Court and requested Chief Justice of India (CJI) NV Ramana to hear the matter related to the electoral bonds as it has been pending since 2019. The court said that the matter had been delayed due to Covid-19, with the CJI giving an assurance that it would be heard soon. The SC is likely to hear the matter in July once the court reopens after the vacation.

Interestingly enough, the Supreme Court had also passed an interim order on the petition in April 2019, directing political parties that had received donations through electoral bonds to submit details to the Election Commission in a sealed cover. In May 2019, the EC submitted the data of as many as 105 political parties to the Supreme Court, and the details of these parties are still lying in a sealed cover before the court.

The Reporters’ Collective had recently investigated and found that only 19 parties received funds through bonds so far, not 105 parties. Of the 19 parties, 17 were mentioned in the list of 105 political parties.

Notably, among the 105 political parties, 70 were registered as unrecognised political parties that were not eligible to receive donations through bonds. The electoral bonds scheme allows only those parties with at least one per cent vote share in the last General Assembly elections or State Assembly polls to avail of its benefits. Some parties replied to the EC, stating they did not even know what electoral bonds were. Such is the brazenness with which political parties are dealing with the issue.

According to data, BJP had the lion’s share of the electoral bonds, i.e. 67.9 per cent or Rs 4,215.89 crore of the total electoral bonds worth Rs 6,201 crore sold in the financial years 2017-18 and 2019-20. The Congress party received Rs 706.12 or 11.3 per cent of bonds. Biju Janata Dal (BJD) stood third with Rs 264 crore or 4.2 per cent of bonds. The remaining 16.6 per cent of bonds went to other national and state political parties.

What is the electoral bonds scheme?

The electoral bonds scheme allows individuals and corporations to purchase electoral bonds from the State Bank of India, which can then be provided to political parties. The bonds are a bearer instrument; the political parties need to deposit them in the State Bank of India to redeem it. The bond is valid only for 15 days from the day of its purchase. The names of the donors will remain anonymous.

Why is it dangerous for democracy?

The petitioners of the electoral bonds scheme had challenged it before the Supreme Court and called it unconstitutional because it lowers transparency regarding political party funding. During the scheme’s introduction, the government made subsequent amendments in the Representation of People Act, 1951, that made the entire political funding process even more non-transparent. Under the new amendments, the parties did not have to reveal the names of the donors who had donated money through electoral bonds before the EC. The parties only reported the sum total of the money received to the Commission.

The petition also said that the bonds are designed to keep the identity of the donors secret from company auditors, the Income Tax authorities, the Election Commission of India and the public at large.

The petitioners pointed out that the scheme will lead to the ‘strengthening of corporate influence over governance’. They alleged in the petition that it would increase quid pro quo arrangements between corporates and governments and pave the way for more crony capitalism.

In the face of criticism, Prime Minister Narendra Modi-led government has defended the scheme, saying that it will tackle black money, protect donors’ privacy and move towards a more transparent system. But not one, multiple media reports have exposed that the scheme has been only devised to allow dirty money to enter politics which is dangerous for our economy and democracy.

All eyes are on the apex court now, which is expected to hear the matter. Since there is no stay on the sale of bonds, the State Bank of India continues to sell bonds. With the 2024 Lok Sabha elections nearing, the Supreme Court’s decisions or directives regarding the electoral bonds hold weight.

If free and fair elections have to be conducted in the country, in the interest of democracy, people must be made aware of the names of the donors who fund the political parties they vote for. Transparency in funding is in the interest of democracy. It can no longer be pushed to the backburner.


Poonam Agarwal is an independent investigative journalist with over 18 years of experience. She has reported for the BBC World, The Reporters’ Collective, Organised Crime & Corruption Reporting, The Quint, NDTV and Times Now. She is a recipient of many awards in journalism including the Ramnath Goenka Excellence in Journalism Awards.