🗳️ Electoral Bonds Scheme – UPSC Notes (Simplified)
📌 Why in News?
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In Feb 2024, the Supreme Court of India struck down the Electoral Bonds Scheme in the case:
Association for Democratic Reforms (ADR) vs Union of India. -
Court ruled that the scheme violated citizens' Right to Information and was unconstitutional.
🔍 What is the Electoral Bonds Scheme?
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Introduced in 2018 by the Government of India.
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Purpose: To bring transparency in political funding and reduce black money in elections.
✅ Key Features:
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A promissory note or bearer instrument, like cash – no name of donor is mentioned.
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Issued by: Only through State Bank of India (SBI).
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Who can buy?:
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Any Indian citizen.
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Any company registered in India.
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Who can receive?
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Only political parties that got at least 1% votes in the last general election.
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Validity: Can be encashed within 15 days in the party’s authorized account.
🧾 Example (Simplified):
Let’s say:
👤 Mr. Ramesh owns a big company called Ramesh Pvt. Ltd.
🏦 He goes to State Bank of India (SBI) and buys Electoral Bonds worth ₹1 crore.
🔒 These bonds:
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Are like money, but no one can see Mr. Ramesh’s name on them.
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Only SBI knows who bought them.
🎁 Mr. Ramesh gives these bonds to a political party he supports — let’s say Party A.
🏛 Party A takes the bonds to SBI, and SBI gives them ₹1 crore in their bank account.
✅ Mr. Ramesh’s name stays secret. ❌ Voters cannot know that Mr. Ramesh or his company gave ₹1 crore to Party A
🧨 Problem?: Voters cannot know the source of political funds → Risk of corruption or secret business-political deals.
⚖️ Supreme Court Verdict (2024)
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Held the scheme unconstitutional on these grounds:
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Violated Article 19(1)(a) – Right to know (part of Freedom of Speech).
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Allowed unlimited and anonymous corporate donations, violating political equality (Article 14).
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Did not pass the proportionality test – not the least restrictive way to reduce black money.
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Struck down amendments made to:
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Income Tax Act, Representation of People Act, Companies Act (which enabled this scheme).
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⚙️ SC Directions:
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SBI to stop issuing bonds immediately.
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SBI to submit donor and receiver details of all bonds issued since April 2019.
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Election Commission of India (ECI) to publish this data on its website.
📌 Significance:
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Big win for transparency and electoral reforms.
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Ensures that public has the right to know who funds political parties.
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Stops misuse of corporate money in influencing policies and elections.
🧠 Quick Recap Points for Prelims:
| Feature | Details |
|---|---|
| Started | 2018 |
| Issued by | SBI |
| Eligible Buyers | Indian citizens, Indian companies |
| Beneficiaries | Registered political parties (1% vote in last election) |
| SC Verdict | Scheme unconstitutional (Feb 2024) |
✅ MCQs on Electoral Bonds Scheme
Q1. What is the main feature of an Electoral Bond?
A. It bears the name of the donor
B. It is issued by the Reserve Bank of India
C. It is a bearer instrument with no donor name
D. It can be purchased only by foreign companies
Answer: ✅ C. It is a bearer instrument with no donor name
Q2. Which bank was authorized to issue Electoral Bonds?
A. RBI
B. ICICI
C. HDFC
D. SBI
Answer: ✅ D. SBI
Q3. As per the Electoral Bond Scheme, political parties are eligible to receive donations through bonds if they:
A. Are registered under Companies Act
B. Secured at least 1% of votes in the last general election
C. Have received FCRA clearance
D. Have 1000 members
Answer: ✅ B. Secured at least 1% of votes in the last general election
Q4. Which Article of the Constitution was cited by the Supreme Court while striking down the Electoral Bond Scheme?
A. Article 14
B. Article 19(1)(a)
C. Article 21
D. Both A and B
Answer: ✅ D. Both A and B
Q5. What was one major criticism of the Electoral Bonds Scheme by the Supreme Court?
A. It encouraged black money
B. It violated the right to information
C. It required Aadhaar for buying bonds
D. It promoted cash donations
Answer: ✅ B. It violated the right to information
