“The Supreme Court’s verdict on the Electoral Bonds Scheme reaffirms the essentiality of transparency in political financing for the health of democracy.” Examine.


The five-judge Constitution Bench, in a unanimous verdict, declared the Electoral Bonds scheme unconstitutional. It ordered the SBI to stop issuing electoral bonds immediately and submit information of the bonds sold, and the names of all the donors and recipients, to the Election Commission of India (ECI).


  • Introduce your answer by outlining the Electoral Bonds Scheme and the recent decision of Supreme Court’s declaring the scheme as unconstitutional.
  • In the body discuss the significance of the verdict – Upholding democratic values, strengthening right to information, curbing crony capitalism, addressing money laundering concerns, etc. Next talk about the challenges that still remain with political funding – Lack of alternative mechanisms, risk of cash donations’ resurgence, balancing transparency with privacy, etc.
  • The verdict reaffirms transparency’s significance, urging a re-evaluation of funding mechanisms to sustain democratic principles.


The Electoral Bonds Scheme, introduced through the Union Budget of 2017, aimed at ensuring transparency in political funding by allowing individuals and corporates to buy bonds from the State Bank of India (SBI) and donate them anonymously to political parties. However, the Supreme Court of India struck down the scheme, declaring it unconstitutional for violating the right to information and undermining the transparency in political financing, thereby affecting the health of democracy.

Significance of the Verdict:

  • Upholding Democratic Values: By demanding disclosure of bond sales and donor-recipient details to the ECI, the Court reinforces the democratic principles of transparency and accountability in political financing.
    • Underscores the need for electoral reforms to align with the constitutional goals of reducing corruption and criminalization in politics.
  • Strengthening the Right to Information: The Supreme Court ruled that the Electoral Bonds Scheme violated the fundamental right to information under Article 19(1)(a) of the Constitution.
    • Transparency in political funding is crucial for informed voting and democratic engagement.
  • Curbing Potential for Crony Capitalism: The decision seeks to eliminate the risk of undisclosed foreign and corporate funding that could lead to undue influence on policy-making and governance, thereby protecting the sovereignty of electoral processes.
    • The Court struck down the removal of the 7.5% profit cap for corporate donations.
  • Addressing Concerns of Money Laundering: associated with the electoral bonds and the use of black money in politics.
    • The RBI had expressed concerns that the scheme could encourage money laundering.
  • Promoting Fair and Free Elections: By demanding transparency in political funding, the verdict supports the conduct of fair and free elections, essential for a healthy democracy.
  • Promotion of Equality in Political Competition: by addressing the discriminatory nature of the Electoral Bonds Scheme based on vote share, the Supreme Court aims to prevent an unfair advantage to dominant parties.
  • Reinforcement of Legal Requirements for Disclosure: incumbent upon political parties under the Representation of Peoples Act, 1951 to maintain transparency about their financial sources and expenditures, thereby enhancing the electorate’s trust in the political system.
  • Encouraging Public Funding Options: The judgment opens the door for discussions on alternative funding mechanisms, such as public funding for political parties or a National Election Fund.

Challenges that Still Remain with Political Funding:

  • Lack of Alternative Funding Mechanisms: The verdict does not propose a clear alternative to the electoral bonds scheme, leaving a vacuum in political funding mechanisms.
  • Risk of Regression to Cash Donations: such as cash donations below ₹20,000, which do not require disclosure. This could lead to an increase in unaccounted money in politics, undermining efforts to ensure transparency.
  • Challenges in Enforcing Compliance: with disclosure norms and transparency standards remains, given the past reluctance of political parties to adhere to transparency norms.
  • Balancing Transparency with Privacy: Finding a balance between the need for transparency in political funding and protecting the privacy of donors who may fear reprisals remains a complex issue.

The verdict of the Supreme Court reaffirms the indispensable role of transparency in political financing. It calls for a re-evaluation of mechanisms for political funding, aiming to establish a system that strengthens democracy and ensures accountability and fairness.

‘+1’ Value Addition:

  • The SC laid stress on the virtues of “open governance” and accepted the idea that “information about funding of political parties is essential for the effective exercise of the choice of voting”.
  • “There is a legitimate possibility that financial contributions to a political party would lead to quid pro quo arrangement because of the close nexus between money and politics.”
  • The Supreme Court applied the proportionality test, outlined in the 2017 Puttaswamy judgement and concluded that the electoral bond scheme is not the least restrictive method that the government could have adopted.
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