Electoral bonds- The Biggest Financial Scam in India?

               Article by- Tanay Kulkarni, Student of VES College of Law, Mumbai

The Supreme court on 15th of February, 2024 declared the electoral bonds scheme brought by the BJP led NDA government, Unconstitutional. The apex court stated that this scheme violated the voters Right to information(RTI), which is enshrined under Art 19(1)(a) of the constitution. The court struck down the sale of electoral bonds with immediate effect.

So, what exactly is the Electoral Bonds (EB) Scheme and how can this turn out to be one of the largest “Financial Scams” in the history of India? In this article we shall do an in- depth analysis of the electoral bonds scheme and all the irregularities it dealt with.

What is the Electoral Bonds Scheme?

This scheme was launched by our late Finance minister, Mr. Arun Jaitley in the year 2017 while presenting the union budget. In his speech at the parliament, he stated that in the 70 years of India’s independence, the country has not come up with a transparent method to donate the political parties which is important for free and fair elections. He stated that the electoral bonds scheme  would help get greater transparency and accountability in political funding, while preventing future generation of black money. 

These bonds would be issued by the State Bank of India (SBI). Donors could buy the bonds from specific 29 SBI branches only. Each bond can have a value of 1000, 10,000, 1 lakh, 10 lakh or 1 crore rupees. Donors need to complete some basic KYC work before they could buy these bonds, but these details would stay confidential ensuring the anonymity of the donor.

They would be available to be purchased only for a period of ten days each in the months of January, April, July and October, with an additional period of 30 days specified by the central. Apart from this, an additional period of 15 days would be given for the sale in case of elections for Lok Sabha and Legislative Assemblies of states and union territories.  Only those parties that are registered under the section 29A of the Representation of Peoples Act, 1951 and only those that receive a minimum of 1% of the total votes in an election are eligible to receive donations.

Once a donors buys an electoral bond, then the donated amount would appear in the designated bank account of the political party. This means that only the SBI shall know about the donor who purchased the electoral bond, even the political party which received the bond shall not know about its donor. Since, the SBI does not come under the ambit of Right to Information (RTI) as it is not a constitutional body, no citizen can file for RTI and know about the whereabouts of the electoral bonds.

These bonds would act as a Bearer- instrument like a currency, and any political party can avail it. These bonds would be valid only for 15 days from the date of issue. The bond would be invalid after the period of 15 days and neither a payment would be made to the political parties nor it would be refunded to the original donor. That amount would be deposited to the Prime Minister Relief Fund (PMNRF) by the SBI. The PMNRF had received over 20 crores from the SBI as the amount accrued from the non- encashed electoral bonds.

 Ironically, these bonds would be exempted from paying any tax, i.e. neither the individuals who bought it nor the political parties who received it shall pay any tax. The donor was not required to pay any sort service charge to the SBI, even for the cost accrued from the printing of the bonds. Ultimately, the tax payer has to bear the cost. The Government of India had paid nearly 9 crores for the issuance and redemption of electoral bonds from Phase I to Phase XXV.  The printing of the bonds were done by the Security Printing & Minting Corporation of India Ltd(SPMCIL). 

Legal Framework

The legal framework of electoral bonds was established through amendments to several Laws, including

  1. The Reserve Bank of India Act, 1934- Earlier only the RBI was enshrined with the power of printing the currency and other financial documents, but the amendment gave power to the SBI to print the electoral bond. This amendment was brought via a money bill even though the RBI Act, 1934 does not come under money bill. The opposition criticized this stating that this was a planned move because as per the rules, only the Lok Sabha approval is required for passing of a money bill and since the government at that time did not posses’ majority in the Rajya Sabha, the fear of not being approved by the Rajya Sabha did not exist. 
  2. The Companies Act, 2013- Earlier, as per Sec 182 of the act, the companies could donate only 7.5% of the last 3 years average profit. The amendment, lifted this cap and allowed for unlimited and anonymous corporate donations to political parties. This means that if a company is earning about Rs 100, it can contribute Rs 1000.
  3. Representation of Peoples Act, 1951- Amendments were made to Section 29C, which deals with the reporting of political contributions. Political parties are no longer required to report contributions received through electoral bonds, ensuring donor anonymity.
  4. Income Tax Act, 1961- Amendments were made to Section 29C, which deals with the reporting of political contributions. Political parties are no longer required to report contributions received through electoral bonds, ensuring donor anonymity.
  5. Foreign Contribution (Regulation) Act, 2010 (FCRA)- The Finance Act of 2016 and 2018 amended the FCRA to allow foreign companies with subsidiaries in India to make donations to political parties. This change was facilitated by redefining what constitutes a foreign company, thus potentially opening the door to foreign influence in Indian elections.

The government has stated that it had discussed about the electoral bonds scheme with the RBI and the ECI and only after their approval the scheme was introduced. However this turned out to be false, because there were leaked letters of communication between the them and the Ministry of finance siting their grievance against the scheme

Reserve Bank of India on Electoral Bonds Scheme

In one of the letters dated on 30th January 2017, the RBI had raised several concerns regarding the scheme. Some of them were-

  • The bonds issued would act as a currency and only the RBI should have the power in issuing them. They were against the government’s stance of giving the power to the SBI as this would impact the trust of the official bank notes. 
  • It stated that amending the section 31 of the RBI act would seriously undermine a core principle of central banking legislation and doing so would set a bad precedent. 
  • Even the intended purpose of transparency may not be achievable as the original buyer of the bond need not be the actual contributor to the political party. This may lead to circulation of black money in the market.
  • The person buying the bond will be as per the KYC parameters, the identity of the intervening person will not be known. Thus, the principles of Prevention of Money Laundering Act (PMLA)2002 would be affected.

The Ministry of Finance responds to the letter the same day stating that the RBI has not understood the intention and purpose of the scheme and the advice had come quite late at a time when the finance bill was already printed. Hence, the government continued with the proposal.

On 27th September, 2017 the RBI again writes a letter to the Finance ministry stating the following concerns-

  • Issuance of bearer form is fraught with serious risk of money laundering as the transfer of money from the donor to the political party will be made in cash, this will leave no trail of the transaction hence, black money can be used in purchasing the bonds.
  • The EB’s in scrip form could be exposed to the risk of forgery and cross-border counterfeiting besides offering a convenient vehicle for abuse by “aggregators”.
  • The transparency may not be achieved because all the data regarding the bonds will be stored by the SBI and it is a part of the government as the chairman of SBI is appointed by the government of India. Hence, any member of the ruling party can use their power and know which person donated how much money or which party received how much via the contributions. 

Election Commission of India on Electoral Bonds Scheme

The ECI in the letter dated 26th May,2017 raised the following dissatisfaction regarding the scheme. Some of the points were-

  • It stated that the amendments brought under the Companies Act, 2013 which raised the 7.5% cap and allowed for unlimited donations to the political parties would open up the possibility of shell companies being set up for the sole purpose of making donations to the political parties, with no other business of consequence having disbursable profits. This may lead to increased use of black money for political funding through shell companies.
  • The second amendment in sec 182(3) of the Companies Act, abolishes the provisions that firms must declare their political contributions in their profit and Loss Statement, as this requirement is now reduced to only showing a total amount under this head, which again would compromise transparency
  • It also violated the Representation of Peoples Act, 1951 as providing the condition that only the parties that receive 1% of the total votes would be eligible to receive the donations would be unfair towards small parties.  

Major criticisms against the scheme

When the scheme was introduced by the government it has claimed that the complete donor details would be anonymous and no party shall no the source of their donations. However, after the introduction of the EB’s a laboratory test was conducted which revealed a unique code engrained on each bond which was visible only via ultra-violet light. This means that it would be easy for the political party to keep a track of the source of their donation. Although, the SBI stated that a security code was required as that would prevent anyone from printing fake bonds. This helped companies as they can inform the political parties of their donations by giving the security code and in the future the company can take favors from the government. The contributions can be made as a quid pro quo measure.

On March 21st after the details of the bonds were made public as per the apex court order it was revealed that 92.30% of the total bonds were purchased in 1 crore denominations indicating that these bonds were purchased by corporate entities rather than individuals. The top 5 political parties that received the most donations were-

  1. BJP- 6,060 Crores
  2. TMC- 1,609 Crores
  3. Congress- 1,421 Crores
  4. BRS- 1,214 Crores
  5. BJD- 775 Crores

After analyzing the details and patterns of the donations certain surprising discoveries can me made, like-

  • There are 21 companies that purchased the bonds while there were ED and CBI raids going against them. Some of them are-

Name of company

Date of raid

Date of purchase of EB


United Phosphorus

January 2020

Nov,15 2022

50 Cr

Aurobindo pharma

November 2022

Nov 15 2022

5 Cr

Sun Pharma

May 2019

May 8 2019

10 Cr

HES Infra

Feb 2021

April 8, 2021

20 Cr 

After going through the table we can see that after a raid by an investigation agency either in the same month or after a time period donations were made to the ruling govt via the EB’s and then the case against them was closed. This shows that how the ruling govt was using these investigation agencies in securing their donations.

On 11th April, 2023 Megha Engineering donated 100 Cr to BJP and then the next month it secures a 14,400 Cr govt tender in Thane. Coincidence is it?

Name of the Company

Total Bonds purchased (in Cr)

Net profit (2019-20 to 2022-23)  (In Cr)

Future Gaming and Hotel Services Pvt Ltd



Qwik Supply Chain Ltd



Keventer Foodpark Infra Pvt Ltd 



Madanlal Ltd



Infotel Technologies Pvt Ltd



These are some of the companies that have donated more money then their profits. Now how is it possible that a company has 1 crore profit and it is donating 100 Cr to the political parties? This shows the clear circulation of black money which is being used to fund the political parties

Most of the top companies that donated money via bonds are those companies whose business sustains mainly on govt approvals and tenders. This scheme was clearly being used to bribe the govt in awarding the required licenses, tenders, etc to the companies. 

Supreme Court Judgement 

On 15th Feb, 2024 the bench led by CJI Dr. Dy Chandrachud issued the verdict on the constitutionality of the scheme. The appeal was filed by Association for Democratic Reforms(ADR) and Communist Party of India(marxist). The key issues before the court were-

  • Is the scheme constitutional?
  • Does the scheme violate voters Right to information
  • Can the scheme allow anonymity with the view to protect the donors right to privacy.
  • Does the scheme threaten the democratic process, and free and fair elections.

On 15 February 2024, the Apex Court unanimously struck down the Govt’s 2018 Electoral Bonds (EB) Scheme. The Bench held that this scheme violated the voters’ right to information enshrined in Article 19(1)(a) of the Constitution. The Court ordered for the sale of electoral bonds be stopped with immediate effect. The SBI was asked to submit details of the Electoral Bonds purchased from 12 April 2019 till date, to the ECI. This shall include details of the purchaser as well as the political parties that the bonds were given to. Further, the Court ordered the ECI to publish the information shared by SBI on its official website within one week of getting the information i.e. March 21st , 2024. 


The electoral bonds scheme represents a significant shift in the landscape of political funding in India. While it was introduced with the purported aim of curbing black money and bringing transparency to political donations, its implementation has raised serious legal and ethical questions. The ongoing judicial scrutiny and public debate highlight the critical need to balance the goals of electoral integrity, transparency, and the legitimate interests of donors. The resolution of these issues will have far-reaching implications for the future of democratic governance in India.

Frequently Asked Questions (FAQs)

  1. What are Electoral Bonds?

Electoral bonds are financial instruments introduced by the Government of India to facilitate anonymous donations to political parties. These bonds can be purchased from designated branches of the State Bank of India (SBI) and are redeemable only by eligible political parties.

  1. When where the electoral bonds introduced?

                Electoral bonds were introduced in 2018 as part of the Finance Bill, which was passed by the Parliament of India.

  1. What is the current status of the Electoral bonds Scheme?

The Supreme Court in its judgement on 15Th Feb,2024 declared the scheme Unconstitutional.

Electoral bonds- The Biggest Financial Scam in India?

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