What are electoral bonds? Why were they introduced?

Electoral bonds in India are financial instruments that function as promissory notes or bearer bonds. These bonds can be bought by individuals or companies and are exclusively issued for the purpose of contributing funds to political parties. These bonds are issued by the State Bank of India (SBI) and are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.

The bond can be bought by any Indian citizen or an entity incorporated in the country. The bonds are available for 10 days each in January, April, July and October. The 10-day period is announced by the Centre. The NDA government introduced the electoral bonds scheme on January 2, 2018, with the aim of replacing cash donations and improving transparency in political funding.

Under the scheme, only the political parties registered under Section 29A of the Representation of the People Act, 1951 and which secured not less than 1 per cent of the votes polled in the last elections to the Lok Sabha or a state legislative assembly are eligible to encash electoral bonds.

According to the scheme, the proceeds from any bonds, which are not encashed within 15 days of being issued, are to be deposited in the Prime Minister Relief Fund. In 2018, the government listed the advantages of investing in electoral bonds.