In order to bring about transparent funding of political parties during elections, electoral bonds are used. These are bearer instruments and carry no information about the owner but yield to the holder of the bond. They are issued in multiples of Rs 1000,10000etc. However, they must be used within 15 days of sale.
They were brought into the system to curb the use of black money by political parties for funding their election campaigns. The details of the person buying them are kept anonymous in order to prevent his harassment by the opposition parties. As the donor buys them from banks after furnishing his KYC norms, a check is imposed automatically for the entry of black money into the system. Moreover, the time limit of 15 days ensures that the bonds are not hoarded for a longer period of time. They also provide tax incentives to the buyer.
Despite the above advantages, some people criticize their use. According to them, the Government may nudge the public sector banks into revealing the KYC details of the people who had invested in the electoral bonds. It may lead to a vindictive attitude towards these people by the government in case they fund the opposition.
However such a situation seems to be far-fetched. Moreover, if the electoral bonds are coupled with other measures like reducing the duration of the election and in turn reducing the period of spending by the political parties, an efficient check can be placed on illegal election funding. This will lead to drastic drop in fiscal slippage and monetary transmission and other functions are smoother for the RBI to perform.