An anonymous political funding system that protects donor identities is electoral bonds. During the 2017–2018 budget session, Finance Minister Nirmala Sitharaman introduced them in the Finance Bill of 2017.

The Supreme Court of India ruled in a landmark decision that electoral bonds are unlawful and “unconstitutional.” A few months before the largest democratic elections in history, the Lok Sabha elections of 2024, took place, on February 15, this decision was made.

A five-judge Supreme Court bench led by Hon. Dhanajay Yeshwant Chandrachud, Chief Justice of India, made the decision. The judge stated, “The scheme has been declared unconstitutional, the issuance of fresh bonds is prohibited.”

“Compared to an individual, a company has a far greater ability to influence the electoral process through political contributions. Companies make contributions solely as part of business dealings with the hope of receiving benefits in return, according to SC.

However, what are electoral bonds and how do they work? Let’s talk more about them.

Electoral bonds

An anonymous political funding system that protects donor identities is electoral bonds. During the 2017–2018 budget session, Finance Minister Nirmala Sitharaman introduced them in the Finance Bill of 2017.

To put it simply, electoral bonds (EBs) are unique financial instruments that are offered for sale in different denominations, ranging from ₹1,000 to ₹10,000 to ₹100,000 and beyond. These bonds can be purchased by people or businesses, who then donate them to the political party of their choosing. After fifteen days, the party may use or cash these bonds without having to pay any further fees. Electoral bonds allow donors to remain anonymous, regardless of the amount donated; this is in contrast to traditional donations, where political parties are required to reveal the identities of contributors for contributions exceeding ₹2,000.

How do electoral bonds work?

The largest commercial bank in the nation, State Bank of India, sells electoral bonds as financial instruments. These bonds can be purchased by people, organizations, or businesses, who can then donate them to a political party.

• Purchase: Interested parties purchase electoral bonds from SBI for a range of sums, from $1,000 to $10,000,000.

• Donation: The purchaser then donates these bonds to the political organization that they back.

• Redemption: Following a 15-day cooling-off period, the political party may redeem these bonds. There is no interest to be paid during the redemption process.

The Controversy

The opposition and other parties have harshly criticized Electoral Bonds since their introduction in 2017 because they impeded political funding transparency. Critics have also drawn attention to the fact that EBs give private organizations the ability to affect and influence governmental decisions.

Notably, the BJP, which is in power, has benefited the most from contributions made through electoral bonds.

According to the Association for Democratic Reforms (ADR), a non-governmental civil society organization that works on financing elections in India, up until November 2023, people and businesses bought these bonds for 165.18 billion rupees ($1.99 billion). Following their introduction, the BJP has issued bonds totaling 120.1 billion rupees, of which at least 65.66 billion have been acquired. The bonds were sold through March 2023, which was the end of the fiscal year.