GUWAHATI: India’s Supreme Court on Thursday banned electoral bonds, a secret source of funding for elections that has reportedly generated hundreds of millions of dollars in revenues for political parties, especially the ruling Bharatiya Janata Party (BJP).
The Supreme Court announced its verdict on an ongoing petition calling for the bonds to be scrapped. The scheme has been under scrutiny, and the top court had in November said that the bonds “put a premium on opacity” and can be “misused for money laundering”.
The electoral bond system which was introduced by Prime Minister Narendra Modi’s government in 2018. Under this system, these bonds must be bought from the State Bank of India but can be donated to parties anonymously.
Although electoral bonds are like a way for people to give money to political parties without telling everyone who they are. But, because the bank handling these bonds SBI is owned by the government, the ruling party can always find out who is giving money to other parties.
This indiscretion is making donors worried and less likely to support opposition parties using these bonds which is why some are in the favour of banning the bonds altogether.
In 2017, several banks of India namely Central Bank and Reserve Bank of India warned the government that these bonds could be misused by shell companies to facilitate “money laundering”.
As per reports since 2018, secret donations of approximately ₹16,000 crore have been given to political parties through these bonds.
Between 2018 and March 2022 – 57% of donations via electoral bonds (about $600m) went to the BJP, as per an analysis by the Association for Democratic Reforms (ADR), a nongovernment organisation.
What are the Electoral Bonds?
Electoral bonds (EBs) are “bearer” instruments, like currency notes. They are sold in denominations of ₹1,000, ₹10,000, ₹100,000, ₹10 lakh and ₹1 crore. They can be purchased by individuals, groups or corporate organisations and donated to the political party of their choice, which can then redeem them, free of interest, after 15 days.
While political parties are required to reveal the identities of all donors who donate more than ₹20,000 in cash, the names of those donating via electoral bonds never have to be revealed, no matter how large the sum.
How do electoral bonds benefit any political party?
The BJP is the single biggest beneficiary of electoral bond donations. Data from the Election Commission of India show that 57% of total donations between 2018 and March 2022 through EBs went to the BJP, amounting to ₹5,271 crore. By comparison, the next largest party, the Indian National Congress, received ₹952 crore, as claimed by ADR.
These electoral bonds provide political parties with a massive injection of resources, giving a clear edge over its competitors.
In 2017, and 2018, two NGOs – ADR and Common Cause – and the Communist Party of India (Marxist) filed two separate petitions in the Supreme Court, urging the court to put an end to the electoral bonds system.
In November 2023, the court had announced that it had concluded hearings in the petitions challenging the bond system. Six years later, the court has finally pronounced its ruling in these cases banning the electoral bonds.