Electoral Bonds Scheme: Transparency in Political Funding
The Electoral Bonds Scheme, introduced in India in 2018, represents a significant reform in political funding, aiming to create a regulated and formal mechanism for donations to political parties. Previously, political funding in India relied heavily on cash contributions, which often lacked transparency and facilitated corruption and unaccounted money in elections. The scheme allows individuals and corporate entities to purchase bonds from designated banks and donate them to registered political parties, which can encash them within a specified period. Proponents argue that the scheme reduces cash-based donations, encourages digital transparency, and strengthens accountability, while critics contend that it introduces opacity, anonymity, and potential government leverage over political funding.
Legally, the scheme is framed under amendments to the Representation of the People Act, 1951, and the Finance Act, 2017. Only political parties registered under Section 29A of the RPA, which secured at least 1% of votes in the previous general election, can receive donations through electoral bonds. Bonds are issued by scheduled commercial banks, available in denominations ranging from ₹1,000 to ₹1 crore, and are valid for encashment for 15 days from the date of issuance. This design aims to channel political contributions through formal banking channels, making funding more traceable and reducing the circulation of unaccounted money in the electoral process.
From a transparency perspective, the scheme has several strengths. By eliminating cash donations, it reduces opportunities for illegal financing, money laundering, and election malpractice. All donations are routed through the banking system, enabling record-keeping, audit trails, and compliance verification. This ensures that contributions are legally recognized and accountable, allowing both regulators and parties to track financial flows. It also simplifies the audit process for political parties, promoting formalized funding mechanisms. By integrating banking infrastructure and digital reporting, the scheme theoretically enhances the traceability of funds and financial discipline in politics.
However, significant concerns remain regarding anonymity and lack of public disclosure. Donors can purchase bonds without their identities being revealed to the public, meaning that while the government may access this information, the citizens, opposition parties, and civil society cannot verify the sources of donations. This has raised questions about the transparency and fairness of the scheme, as it allows undisclosed influence by wealthy individuals and corporate donors. Critics argue that this undermines the democratic principle of openness, leaving room for policy capture and elite dominance in electoral politics.
The scheme also raises issues of regulatory oversight and equity among parties. Only parties meeting specific electoral criteria can receive bonds, favoring established national and regional parties over smaller or emerging political organizations. Additionally, the reliance on government-issued bonds and banking channels centralizes sensitive financial information, creating a potential risk of state surveillance or selective monitoring. While the scheme aims to enhance transparency, these provisions highlight a tension between donor privacy and public accountability, which has sparked judicial scrutiny and debates about the constitutionality of anonymous donations in a democratic system.
Despite these concerns, the Electoral Bonds Scheme reflects an attempt to modernize political funding and reduce cash-based corruption. It provides a legal and banking framework for contributions, encourages digital reporting, and creates an audit trail, which can be strengthened with supplementary reforms. Suggestions for improvement include mandatory public disclosure of large donations, stricter audit procedures, real-time reporting, and independent oversight mechanisms. Strengthening these measures would ensure that electoral bonds genuinely serve the interests of transparency, accountability, and democratic fairness, rather than creating avenues for hidden influence.
In practice, the success of the scheme depends on effective enforcement, oversight by regulatory authorities, and judicial review. Courts have emphasized the need for balance between privacy of donors and the public’s right to know, particularly when anonymous funding could influence governance and policy. Civil society engagement, parliamentary oversight, and technological solutions can complement regulatory mechanisms, enabling voters to understand who funds political campaigns and how this impacts decision-making.
In conclusion, the Electoral Bonds Scheme is a landmark reform in India’s political financing system, designed to formalize donations, reduce unaccounted money, and improve governance transparency. While it has strengths in channeling funds through banks and enhancing compliance, the anonymity of donors and limited public disclosure remain critical concerns. To truly strengthen political accountability, reforms must focus on greater transparency, equitable access for all parties, independent oversight, and public reporting. When implemented with these safeguards, electoral bonds can evolve from a controversial mechanism into an effective tool for clean and accountable political funding, supporting the broader goal of a fair and democratic electoral process in India.