Electoral Bonds, Explained

Electoral bonds were interest-free bearer instruments that any person or company could buy from a designated bank and donate to a registered political party, which then redeemed them for cash. The defining feature was anonymity: the public could not see who gave how much to whom.

The scheme was introduced through the Finance Act of 2017 and operationalised in 2018, with the State Bank of India issuing the bonds. It was passed as a money bill, which limited the Rajya Sabha's ability to amend it, a procedural choice that itself became contested. Removal of earlier caps on corporate donations accompanied the change.

In February 2024 the Supreme Court struck the scheme down as unconstitutional, holding that voter access to information about political funding outweighed donor privacy. It ordered the SBI to disclose the data, which revealed donor-party patterns and reopened the debate over how India should fund its politics.

• Defenders argued bonds routed donations through formal banking channels, reducing cash and protecting donors from retaliation.
• Critics argued anonymity removed accountability, favoured whichever party was in power, and opened the door to quid pro quo and shell-company funding.

Money in politics is a universal problem with different fixes. The United States allows large, often opaque 'dark money' flows through PACs after the Citizens United ruling. The United Kingdom caps and publicly discloses donations, and Germany combines disclosure with substantial state funding of parties. India's struck-down bonds sat at the opaque end of that spectrum, which is why transparency became the deciding principle.

The debate connects to broader questions of transparency, the health of democratic institutions, corporate influence, and proposals such as state funding of elections.