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Electoral Bond Funding – Supreme Court’s Verdict and Latest Updates!

The Supreme Court gave its verdict on electoral bonds and declared electoral bonds illegal and undemocratic. The seven-year-old electoral funding system where political parties receive anonymous funds from individuals and businesses is now banned in India. 

Electoral Bond Funding

Electoral bonds were first introduced in the 2017 Budget session by then Finance Minister Mr. Arun Jaitley. In 2018, it became a mode of electoral funding for political parties. 

Electoral Bonds are issued by the State Bank of India (SBI), as bearer bands or promissory notes that an individual or a company can buy and donate funds to their preferred political party in India. 

Scheme Electoral Bonds
Introduced by  Former FM and Late Arun Jaitley
Started in  2018
Bonds issued by State Bank of India (SBI)

The bonds bought by the individuals or groups or companies in multiples of Rs 1000, Rs 10,000, Rs 1 Lakh, Rs 10 Lakh, and Rs1 crore. 

The donors enjoy a 100% duty-free tax on the donations under this scheme. The bank can’t reveal the identity of donors and has to keep it confidential from third parties. 

EB’s have been the prime source of political party funding since its introduction. According to statistics, 56% of electoral funding comes from donations received via electoral bonds. 

The uncertainty of donors’ identity, like those who have donated, and from where the political parties are getting such big funding has brought a lot of criticism to the scheme.

Critics of Electoral Bonds 

To get you a better understanding of the electoral bonds banding, let’s discuss the reasons that lead to its ban:

Anonymous donations: 

  • The scheme allows parties to receive electoral funding anonymously, which creates uncertainty about the identity of the donor.
  • The donor’s identity is confidential and there is no comprehensive documentation of funds, which can lead to corruption and proliferation of black money in Indian Politics. 
  • According to the Association of Democratic Reforms, since the introduction of electoral bonds, anonymous donors have donated up to $1.9 billion to political parties.
  • No limitations on the donations: In the electoral bond scheme, there was no limitation to the amount of donations received by the political parties, which can increase the influence of business individuals in political affairs. 

Unconstitutional:

  • The scheme was introduced to enhance transparency and expose the illegal money in the electoral funding system, but critics argue that it has done the opposite as there is no public document available to let people know from where the political parties are getting money.
  • This lack of transparency makes it unconstitutional and undemocratic for the democratic country of India.

Money Laundering:

  • The RBI has advised that the bonds can be used by shell companies promoting money laundering. 
  • The anonymous donation and the secrecy of donors’ identities are some of the major reasons that led to the ban on electoral bonds.
  • The five-judge bench headed by Chief Justice Chandrachud said that the scheme is unconstitutional and they are prohibiting the issue of fresh bonds from now on.

Electoral Bond Funding

Who benefited the most through Electoral bond Funding?

According to ADA, the BJP is the largest donation-receiving party in the electoral bond funding system.

From the $1.9 billion donations, BJP has received around $635 million, hence making it the largest donation receiver political party via EBs. After that, we have INC and other parties that cover 44% of the donation received till now.

Political electoral bond funding among the political parties: 

Political Party FY 2018-2019 FY 2019-2020 FY 2021-2022 FY 2022-2023
BJP Rs 1450.89 Cr Rs 25 billion Rs 10 billion Rs 12 billion
INC Rs 383.26 Cr Rs 3 billion Rs 2 billion Rs 1.5 billion
Others Rs 7 billion Rs 6 billion  Rs 15 billion  Rs 13.5 billion

Petitioners who challenged the Electoral Bond Funding

The EB scheme was first challenged by two NGOs named – Common Cause and ADR and later on by the Communist Party of India six years ago.

Now, the five-judge bench from the Nov 23 hearing has finally declared the decision in the favour of petitioners and concluded that the electoral bonds should be prohibited from now on. This news can affect the current political landscape in India as the 18th Lok Sabha election is just around the corner.

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