Key Terms & Concepts — UPSC Mains
Electoral Bonds
"An anonymous instrument for political funding in India, struck down by the Supreme Court in February 2024"
Electoral Bonds were a form of interest-free bearer bonds (like bank notes) that could be purchased by any Indian citizen or company from the State Bank of India (SBI) and donated to a registered political party, which could redeem them within 15 days. Introduced through the Finance Act 2017, they replaced a part of the previous donation mechanism. They were designed to bring formal-sector funding into politics but were anonymous — donors' names were not disclosed publicly. The Supreme Court in Association for Democratic Reforms v. Union of India (2024) unanimously struck them down as unconstitutional.
High-sensitivity topic for GS2 (polity, electoral reforms, right to information, funding of democracy). The SC judgment and the subsequent SBI disclosure controversy are current affairs that directly link to constitutional principles.
- 1 Introduced: Finance Act 2017; scheme notified January 2018
- 2 Issuer: State Bank of India (SBI) — sole authorised bank
- 3 Denominations: Rs 1,000; Rs 10,000; Rs 1 lakh; Rs 10 lakh; Rs 1 crore
- 4 Duration: Valid for 15 days from purchase; unused bonds returned to PMO — this created controversy (government could see who returned bonds)
- 5 Who could buy: Any Indian citizen or company (no upper limit for companies; previous cap of 7.5% of 3-year average profit removed)
- 6 Who could receive: Political parties registered under Representation of People Act with at least 1% vote share in last election
- 7 Anonymity: Donor identity not disclosed to public OR to recipient party (in theory); BUT SBI maintained records
- 8 Supreme Court judgment: Association for Democratic Reforms v. Union of India (Feb 15, 2024) — 5:0 unanimous; struck down as violating Article 19(1)(a) (right to information about political funding)
- 9 SC held: Anonymity in political donations violates voters' right to know; shell company loophole enables quid pro quo corruption
- 10 Post-judgment: SC directed SBI to disclose all bond purchasers and recipients to Election Commission; data published March 2024 revealed corporate-political connections
- 11 Total bonds: ~Rs 16,518 crore sold (2018–2024)
- 12 Top recipients: BJP (Rs 6,986 crore), TMC, Congress, BRS, BJD among top receivers
When SBI disclosed electoral bond data after the SC order, it revealed that several companies that had bought bonds received government contracts or regulatory approvals shortly after their donations — illustrating the 'quid pro quo' risk that the SC identified as constitutionally impermissible.