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What is Electoral Bond that SC declared Unconstitutional?

Electoral Bond a guide to India’s Political “Unconstitutional” Funding Scheme



Electoral Bond

Find out everything about Electoral Bond and why the Supreme Court has declared the Electoral Bond unconstitutional in this informative article

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Electoral bond is a financial instrument that allows individuals and entities to donate money to political parties anonymously. It was introduced by the Indian government in 2018 to bring transparency and accountability to the political funding system. In this blog post, we will explain what electoral bonds are, how they work, and what are their benefits and drawbacks.

What are electoral bonds?

Electoral bonds are bearer instruments, which means that whoever holds them is the owner. They do not have the name of the donor or the recipient on them, and thus, they protect the identity of both parties. Electoral bonds are issued by the State Bank of India (SBI) in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. They can be bought by any Indian citizen or entity incorporated in India after fulfilling the KYC norms laid down by the RBI.

Electoral bonds can be purchased for 10 days each in January, April, July and October. The government may also announce additional periods for buying electoral bonds in an election year. Electoral bonds have a validity of 15 days from the date of issue, during which they can be donated to any registered political party that has secured at least 1% of the votes polled in the last Lok Sabha or assembly election. The political parties can encash the electoral bonds only through their designated bank accounts with SBI.

How do electoral bonds work?

The process of buying and donating electoral bonds is as follows:

  1. The donor visits any SBI branch and fills an application form with their personal details and the amount of electoral bonds they want to buy. They also have to provide their PAN number and Aadhaar number for verification.
  2. The donor pays for the electoral bonds through a cheque, demand draft or electronic transfer from their bank account. Cash transactions are not allowed.
  3. The SBI issues the electoral bonds to the donor after verifying their identity and eligibility. The electoral bonds do not have any serial number or identification mark on them.
  4. The donor can donate the electoral bonds to any eligible political party within 15 days of their issue. The donor does not have to disclose their identity or the amount of donation to the political party.
  5. The political party receives the electoral bonds from the donor and deposits them in their designated bank account with SBI within 15 days of their issue.
  6. The SBI verifies the validity of the electoral bonds and credits the amount to the political party’s account. The SBI also informs the Election Commission of India (ECI) about the details of the transactions.

What are the benefits of electoral bonds?

The supporters of electoral bonds claim that they have several advantages over the previous methods of political funding, such as:

  1. They promote transparency and accountability by ensuring that all donations are made through formal banking channels that are audited by government authorities.
  2. They protect the privacy and security of the donors by keeping their identities confidential and preventing any harassment or intimidation by political parties or rivals.
  3. They reduce the influence of black money and corruption in politics by discouraging cash donations and anonymous contributions.
  4. They encourage more people and entities to participate in political funding by providing them with a convenient and legal way to support their preferred parties.


What are the drawbacks of electoral bonds?

The critics of electoral bonds argue that they have several disadvantages and loopholes, such as:

  1. They violate the right to information and freedom of speech of the citizens by denying them access to crucial information about who is funding whom in politics.
  2. They create an uneven playing field for smaller parties and independent candidates by favouring those who have more resources and connections to attract large donations.
  3. They undermine the role of ECI as a watchdog of democracy by limiting its power to monitor and regulate political funding.
  4. They pose a risk of money laundering and foreign interference in politics by allowing anonymous donations from unknown sources.

Why Supreme Court of India find Electoral Bond unconstitutional?

Electoral bonds are a controversial form of political funding that allow donors to anonymously contribute money to political parties through a bank. The scheme was introduced by the central government in 2018 with the stated objective of curbing black money and increasing transparency in political donations. However, the scheme has been widely criticized for creating opacity and unfairness in the electoral process, as well as violating the constitutional rights of voters and citizens.

On February 15, 2024, the Supreme Court of India delivered a landmark judgment that struck down the electoral bonds scheme as unconstitutional. The judgment was pronounced by a five-judge Constitution Bench headed by Chief Justice of India DY Chandrachud, who also authored the main opinion. The court held that the scheme violates Article 19 (1) (a) of the Constitution, which guarantees the freedom of speech and expression, including the right to information.

The court reasoned that the right to information is essential for a functioning democracy, as it enables citizens to make informed choices and participate in public affairs. The court observed that political parties play a vital role in the democratic process, and therefore, there is a need for transparency and accountability in their funding sources. The court noted that financial contributions to political parties can have a significant impact on policy-making and governance, and hence, the public has a right to know who is funding whom and for what purpose.

The court also rejected the argument of the central government that the electoral bonds scheme is necessary to prevent black money and protect donors from harassment by political rivals. The court said that these objectives do not justify the infringement on the right to information, and that there are other ways to achieve them without compromising on transparency. The court suggested that the government can explore alternative measures such as state funding of elections, ceiling on donations, disclosure of donors’ identity, etc.

The court further directed the State Bank of India (SBI), which is the authorized issuer of electoral bonds, to stop issuing them with immediate effect. The court also ordered SBI to furnish all the details of donations made through electoral bonds, as well as the details of political parties that received them, to the Election Commission of India (ECI) within three weeks. The ECI was instructed to publish these details on its website by March 31, 2024.

The Supreme Court’s verdict on electoral bonds is a historic step towards ensuring transparency and accountability in political funding and strengthening democracy in India. The verdict upholds the constitutional rights of citizens and voters, and restores their trust in the electoral system. The verdict also sends a clear message to the political parties that they cannot hide behind anonymity and evade public scrutiny.


Electoral bond is a controversial scheme that has sparked a lot of debate and litigation in India. While it aims to reform the political funding system, it also raises several questions about its impact on democracy, transparency and accountability. As citizens, we should be aware of how electoral bonds work and what are their implications for our political system.

Vinay Kumar is Marketing Professional turned Entrepreneur, believes in turning ideas into reality.

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