BharatNotes What is Electoral Bonds?
An electoral bond was an interest-free bearer instrument — similar to a promissory note — that could be bought from designated branches of the State Bank of India (SBI) and donated to a registered political party. The buyer paid through banking channels after completing KYC, but the bond carried no name of either the donor or the recipient party, making donations anonymous to the public. The Electoral Bond Scheme was notified on 2 January 2018 and first issued the same year, after being announced in the Union Budget 2017-18 by then Finance Minister Arun Jaitley.
Key features of the scheme
| Feature | Detail |
|---|---|
| Issuing bank | State Bank of India (SBI), select branches |
| Denominations | ₹1,000; ₹10,000; ₹1 lakh; ₹10 lakh; ₹1 crore |
| Who could buy | Any Indian citizen or company registered in India (after KYC) |
| Eligible parties | Registered under Sec. 29A, RPA 1951, with ≥1% of votes in the last general/assembly election |
| Validity | 15 days to encash; else credited to the PM's Relief Fund |
| Sale windows | 10 days each in January, April, July and October |
The scheme rested on amendments made through the Finance Act, 2017 (passed as a Money Bill): Section 31 of the RBI Act was amended to permit bond issuance; Section 29C of the Representation of the People Act, 1951 was amended to exempt bond donations from disclosure; and Section 182 of the Companies Act, 2013 was amended to remove the earlier cap of 7.5% of average three-year net profit on corporate donations and to drop the requirement of naming the recipient party. A 2016 amendment to the FCRA, 2010 widened the definition of "foreign source", opening the door to funding by foreign-owned Indian companies.
The 2024 Supreme Court verdict
On 15 February 2024, a five-judge Constitution Bench led by CJI D.Y. Chandrachud unanimously struck down the scheme in Association for Democratic Reforms v. Union of India. The Court held that anonymous donations violated the voter's right to information under Article 19(1)(a), and that permitting unlimited corporate funding offended the principle of free and fair elections and Article 14. The Court directed SBI to stop issuing bonds, share purchase and redemption details (from 12 April 2019) with the Election Commission, which published the data on 13 March 2024.
Current status and significance
The scheme stands scrapped; no electoral bonds may be issued. Disclosures showed bonds worth roughly ₹16,518 crore were sold over 2018-2024 (per data released March 2024). The verdict is significant for strengthening transparency in political funding and reaffirming judicial scrutiny over reforms enacted as Money Bills.
UPSC relevance: Foundation concept — it underpins recurring GS2 themes on electoral reforms, transparency, the Right to Information and the conflict between donor privacy and voter awareness; no direct PYQ is cited here.
Don't confuse with: electoral trusts (a separate, still-legal route for routing corporate donations with disclosure).
Sources: Supreme Court Observer (ADR case file); Wikipedia (Electoral Bonds); PIB / Finance Act, 2017.
