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Electoral Bonds Scheme in India and Extortion?

The article examines the Electoral Bonds Scheme in India and its potential role in enabling extortion, discussing concerns about transparency, regulatory actions, quid pro quo, and accountability issues, highlighting the scheme’s ethical dilemmas and implications for democratic governance.

What is the context?

The Electoral Bonds Scheme in India has been a subject of intense scrutiny, with concerns raised about its transparency, potential for misuse, and role in enabling extortion.

Electoral Bonds Scheme
  1. As per the guidelines of the Scheme, The purchaser must be a citizen of India or an entity incorporated or established within India. Individuals, as purchasers, have the flexibility to buy Electoral Bonds either individually or in collaboration with others.
  2. Only political parties that are registered under Section 29A of the Representation of the People Act, 1951 and have got at least one percent of the votes in the recent General Election to either the House of the People or the State Legislative Assembly are eligible to accept Electoral Bonds. Furthermore, these Electoral Bonds can only be redeemed by an eligible political party through a designated bank account with an authorized bank.
  3. The Government of India has empowered the State Bank of India (SBI) to issue and redeem Electoral Bonds through its designated branches.
  4. Each Electoral Bond remains valid for 15 calendar days from its issuance date. Payments will not be processed for any political party if the Electoral Bond is deposited after its expiration. Eligible political parties depositing Electoral Bonds will have the amount credited to their accounts on the same day.
Regulatory Actions and Political Contributions
  • Recent disclosures by the State Bank of India (SBI) to the Election Commission of India (ECI) indicate that several companies facing regulatory scrutiny from agencies like the Enforcement Directorate (ED) and Income Tax (IT) Department purchased electoral bonds for substantial donations to ruling parties.
  • The correlation between regulatory actions and large political donations raises questions about the scheme’s susceptibility to exploitation as a tool for extortion.
Transparency vs. Anonymity in Political Funding
  • Proponents argue that the Electoral Bonds Scheme offers a transparent mechanism designed to protect donor anonymity. Companies facing regulatory actions may have trusted this anonymity to avoid potential retribution or scrutiny.
  • Critics counter that the scheme’s opaque nature, coupled with a lack of robust safeguards against trading electoral bonds, undermines transparency. This opacity could potentially enable extortion, money laundering, and the creation of shell companies for anonymous donations.
Quid Pro Quo and Business Interests in Political Donations
  •  The existence of quid pro quo (a favour or advantage granted in return for something) in political donations, where companies contribute to advance their business interests, is widely acknowledged.
  • Critics believe the scheme encourages influence-peddling and kickbacks. Allowing loss-making companies to donate via electoral bonds complicates matters. This raises concerns about the motives behind such contributions. It blurs the lines between legitimate political support and extortion.
Conflicting Statements and Accountability Issues
  • Alphanumeric Code Controversy: Conflicting statements regarding the recording and disclosure of alphanumeric codes associated with electoral bonds have fueled skepticism.
  • Transparency Concerns: The SBI’s initial claim of needing more time to compile data, along with the lack of transparency surrounding these codes, raises concerns about attempts to delay information disclosure and undermine accountability.
Supreme Court’s Judgment on Electoral Bonds Scheme

The Supreme Court has determined that the Electoral Bonds Scheme infringes upon the right to information and the freedom of speech and expression as guaranteed by Article 19(1)(a) of the Constitution. The court expressed concerns that the scheme could facilitate quid pro quo arrangements. Additionally, the court has declared the amendment to the Companies Act, which permits unrestricted corporate political funding, as unconstitutional.


The Electoral Bonds Scheme in India faces complex challenges. Ethical dilemmas intensify debates about its role. Critics argue it may enable extortion.

The scheme aims to enhance transparency. It also protects donor anonymity. However, its opaque nature and lack of safeguards raise concerns. There’s potential for misuse, compromising its integrity. Addressing these concerns is important. It  will safeguard India’s democratic process and restores public trust in political institutions.

Political contributions should be transparent and ethical. Allegations of extortion and corruption persist. Comprehensive reform is necessary. Public debate on political funding mechanisms is urgent. These steps uphold democratic governance principles.

UPSC CSE Mains Practice Questions

Q 1. Critically analyze the challenges and ethical dilemmas faced by the Electoral Bonds Scheme in India. Discuss the need for comprehensive reform in political funding mechanisms to uphold democratic governance principles and restore public trust in political institutions.

Q 2. Evaluate the effectiveness of the Electoral Bonds Scheme in enhancing transparency and protecting donor anonymity. Discuss the criticisms, challenges, and controversies surrounding the scheme.

Q 3. Evaluate the Supreme Court’s judgment on the Electoral Bonds Scheme, highlighting its observations on the infringement of fundamental rights and concerns about facilitating quid pro quo arrangements.


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