India Explained
Struck downBJPNarendra Modi

Electoral Bond Scheme, 2018

Bearer-type bonds sold by SBI from 2018 let donors fund registered parties without public disclosure of donor names; the Supreme Court struck the scheme down on 15 February 2024.

Political Funding

Facts

  • The scheme was announced by Finance Minister Arun Jaitley in the 2017-18 Budget and notified on 2 January 2018; the package also capped anonymous cash donations to parties at Rs 2,000, down from Rs 20,000 [2][3].
  • A citizen or entity incorporated in India could buy bonds from authorised branches of the State Bank of India after KYC checks and payment from a bank account; bonds carried no payee name and were valid for 15 days [2].
  • Only political parties registered under Section 29A of the Representation of the People Act, 1951 with at least one per cent of votes polled in the last Lok Sabha or Assembly election could receive bonds [2].
  • On 15 February 2024 a five-judge Constitution Bench headed by Chief Justice D. Y. Chandrachud (W.P.(C) 880 of 2017, 2024 INSC 113) struck down the scheme and related amendments [1][5].
  • The Court held that the scheme violated the voter's right to information under Article 19(1)(a) and that the provision permitting unlimited corporate contributions was arbitrary and violated Article 14 [1].
  • The Court directed the issuing bank to stop issuing bonds and SBI to give the Election Commission details of bonds purchased since the interim order of 12 April 2019, for publication [1].
  • Data released in March 2024 showed a total of Rs 12,145.87 crore encashed through the bonds [4].

Why

Reasons given by those who did it

  • The Solicitor General told the Court that the earlier framework was mostly cash-based, which "incentivized infusion of black money", and that the scheme moved donations to a regulated, digital framework [1].
  • The Union argued that donors feared retribution from other parties and that confidentiality encouraged them to give "clean money" [1].
  • Mr Jaitley said in January 2018 that the scheme "envisages total clean money and substantial transparency coming into the system of political funding" [3].
  • The Union said that the one per cent eligibility threshold bars "ghost" parties, KYC limits purchases to verified persons, and the 15-day validity prevents use as a parallel currency [1].

Criticism of that reasoning

  • Petitioners argued that cash donations remained permitted, that the Centre ignored objections from the RBI and the Election Commission, and that non-disclosure promotes quid pro quo arrangements [1].
  • Petitioners cited data indicating that over 94% of bonds were bought in denominations of Rs one crore, suggesting purchases by corporates rather than individuals [1].

Benefits and concerns

Benefits (2)

  • Routed this form of donation through bank accounts with KYC-verified purchasers, creating records.Scheme terms require KYC and payment from a bank account [2]; the Court later ordered SBI records to be disclosed, and data on Rs 12,145.87 crore of encashed bonds were published in March 2024 [1][4].
  • Accompanied a reduction in the cap on anonymous cash donations.The anonymous cash donation cap fell to Rs 2,000 from Rs 20,000 [2]. The effect of this change on the share of cash donations is not quantified in the sources reviewed.

Concerns (3)

  • The Supreme Court held that the scheme violated voters' right to information and, as to unlimited corporate donations, Article 14.Judgment of 15 February 2024 in ADR v. Union of India (2024 INSC 113) [1][5].
  • Funds were concentrated in a few parties and large denominations, as reported after the data release.Business Standard reported, from the data released in March 2024, that the BJP received around Rs 6,000 crore, the Trinamool Congress Rs 1,592 crore and the Congress Rs 1,351 crore; other reports give slightly different totals [4]. Petitioners cited over 94% of bonds in Rs one crore denominations [1].
  • Disclosure rules limited public scrutiny while the scheme operated.The Court ordered disclosure only in 2024; the Union's own submission accepted that donor identities were kept confidential [1].

Evidence points

−8.5
points, mean of two scorers (scale −25 to +25)
−10 to −7
range between the two scorers' totals
Medium confidence
scorers agree within 1 point on every criterion
ReachHow many people did the action materially affect?
Mean 0.0A 0B 0
Outcome evidenceDo official or independent data show the intended result (or its opposite), compared with the era baseline and peers?
Mean −3.0A −3B −3
Cost and sustainabilityIs the fiscal cost proportionate, and is the effect durable?
Mean −3.5A −3B −4
Process and rightsWas it made with debate, consultation and legal soundness, and did it respect rights and court rulings?
Mean −4.5A −4B −5
DeliveryWas it implemented as announced, on time and at scale?
Mean +2.5A +3B +2

Positive meanNegative meanScorer AScorer B

Scorer A. Supreme Court struck down the scheme for violating voters' right to information and Article 14, and disclosed data showed concentrated large-denomination funding.

Scorer B. Struck down by the Supreme Court in 2024 for violating voters' right to information, with funds concentrated in large denominations.

Context used when scoring

Era baseline
Before 2017, anonymous cash donations up to Rs 20,000 per donor were permitted without disclosure; party funding rules were under repeated review by the Election Commission.
Lag before outcomes show
2 years
Uncertainty
Medium confidence. Scorer totals are −7 and −10. How uncertainty is shown.

In depth

The scheme replaced some cash donations with bonds bought from SBI. Purchasers were identified to the bank but not to the public, and parties encashed bonds in designated accounts. Its supporters, including the Union government in court, said it would reduce cash and protect donors from retaliation. Its challengers said it hid the source of funds from voters and could enable favours in return for donations.

On 15 February 2024 the Supreme Court held that the scheme and linked amendments to the Representation of the People Act, the Companies Act and the Income Tax Act were unconstitutional. It ordered SBI to give purchase and encashment details to the Election Commission, which published them in March 2024.

The published data showed that large sums went to both ruling and opposition parties, though in different amounts. The sources reviewed give different party totals, so this entry quotes only the figures from one report. Whether the scheme increased or decreased total unaccounted money in elections is not established by the sources reviewed.

Sources

Last reviewed .Report an error orchallenge a score.

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