Electoral Bonds Explained And What Supreme Court's Verdict Means For Political Parties' Funding

Supreme Court Verdict on Electoral Bond: In a landmark judgement, the Supreme Court of India on Thursday, February 15, struck down the electoral bond scheme, terming it unconstitutional. Now, the State Bank of India will have to disclose names of the contributors to the Election Commission. The Electoral Bonds scheme was implemented six years back with the government calling it an alternative to cash donations. But what are electoral bonds and now as the Supreme Court of India has struck down the scheme, how will it impact the funding of political parties, let's understand. 

What are Electoral Bonds? 

Electoral Bond scheme was notified by the central government on January 2, 2018. Electoral bonds are such financial instruments that individuals or corporate entities can purchase from a bank and present to a political party, which can subsequently redeem them for funds. 

Notably, through electoral bonds, political parties can get funding discreetly without revealing the identity of the donor. Under provisions of the scheme, any citizen of India or entity incorporated or established in the country can purchase electoral bonds. 

The electoral bonds are available in various denominations, ranging from ₹ 1,000 to ₹ 1 crore, and can be obtained at all branches of the State Bank of India (SBI). Currently, the State Bank of India (SBI) is the only government-authorized bank that can issue or encash electoral bonds. These donations are also interest-free.

Who Can Purchase and Redeem Electoral Bonds? 

According to the provisions of the scheme, electoral bonds may be purchased by any citizen of India or entity incorporated or established in the country. An individual can buy electoral bonds, either singly or jointly with other individuals.

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 receive electoral bonds.

According to the notification, electoral bonds shall be encashed by an eligible political party only through an account with an authorised bank.

Why Electoral Bonds Became Popular? 

One of the key features of electoral bonds is the anonymity they provide to donors. When individuals or organizations purchase these bonds, their identities are not disclosed to the public or the political party receiving the funds. 

However, the government and the bank maintain a record of the purchaser's details for auditing purposes, ensuring the legitimacy of funding sources.

At the time of introduction of the scheme, the government pitched it as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.

How Political Parties Benefitted Through Electoral Bonds? 

The ruling BJP received nearly Rs 1300 crore through electoral bonds in the 2022-23, which was seven times more than what the Congress got in the same period through the same route, reported PTI. 

The BJP’s total contributions stood at Rs 2120 crore in the 2022-23 fiscal, of which 61 per cent came from electoral bonds. The Congress, on the other hand, earned Rs 171 crore from electoral bonds which was down from Rs 236 crore in FY 2021-22.

What the Supreme Court Said? 

While delivering the verdict which it reserved in November last year, the Supreme Court said that the electoral bonds scheme violates the right to information and the freedom of speech and expression. 

Pronouncing the verdict,  CJI Chandrachud said the electoral bonds scheme violates the freedom of speech and expression under Article 19(1)(a) of Constitution. The bench said the fundamental right to privacy also includes citizens’ right to political privacy and affiliation.

It directed that the issuing bank shall stop issuance of electoral bonds and the State Bank of India shall submit details of electoral bonds purchased since April 12, 2019 till date to the Election Commission. 

(With inputs from PTI)