The Scheme That Changed Political Funding — Then Got Struck Down
In February 2024, a five-judge Constitution Bench of the Supreme Court of India unanimously struck down the Electoral Bond Scheme, calling it unconstitutional. The ruling came after years of opposition challenges and intense public debate about political financing transparency. Understanding what actually happened — and what the practical implications are — requires going back to the beginning.
What Were Electoral Bonds?
Electoral bonds were interest-free bearer instruments — similar to bank drafts — that any Indian citizen or company could purchase from the State Bank of India in denominations from ₹1,000 to ₹1 crore. These bonds could then be donated to any registered political party, which could redeem them within 15 days. The scheme was introduced in 2018 with the stated aim of bringing donations into the formal financial system, reducing cash transactions in political funding.
Why the Scheme Was Controversial
The central controversy was anonymity. Under the scheme, donors were known to SBI and by extension the government (which controls SBI), but were not disclosed to the public or even to Parliament. Critics argued this created a system where corporations could donate large sums to ruling parties while remaining anonymous to voters, and where the government had potential access to donor information that could be used for regulatory favouritism or coercion. Data revealed after the court’s direction to publish donor details showed that several companies facing regulatory action had made substantial donations — this correlation, while not conclusive proof of quid pro quo, intensified public debate.
What the Supreme Court Found
The Court held that the scheme violated voters’ right to information — a right derived from the right to freedom of speech and expression under Article 19(1)(a) of the Constitution. Voters have a constitutional right to know who is funding the political parties they vote for. The scheme’s anonymity provision directly violated this right. The Court also noted that the scheme amended existing rules to allow unlimited corporate donations to political parties, removing the previous 7.5% of net profit cap — a change the Court found disproportionate and lacking adequate justification.
What Has Changed Since the Ruling
The SBI was directed to submit all electoral bond purchase and redemption data to the Election Commission, which published it publicly. The data revealed ₹16,518 crore in bonds purchased between 2018-2024. India is now back to the pre-2018 system where declared donations above ₹20,000 to political parties must be disclosed. The deeper question — how to design a political funding system that reduces cash while maintaining transparency — remains unresolved and politically contentious.
