SBI Shares Hit 52-Week High As SC Strikes Down Electoral Bonds Scheme, Declares It Unconstitutional

In a decision on February 15, the Supreme Court declared the electoral bonds scheme 'unconstitutional' and in violation of the right to information and Article 19(1)(a). The ruling stated that allowing corporates to make unlimited contributions is arbitrary and against the fundamental rights of citizens.

A five-judge Constitution bench, led by Chief Justice D Y Chandrachud, delivered the verdict after months of deliberation, responding to a series of petitions challenging the validity of the electoral bonds scheme. The controversial scheme, introduced by the government on January 2, 2018, aimed to provide an alternative to cash donations to political parties, with the purported goal of increasing transparency in political funding.

The Supreme Court order emphasized, "Electoral bonds schemes are violative of fundamental rights and are unconstitutional. Allowing corporates to make unlimited contributions is arbitrary and unconstitutional." This ruling is a significant development in India's political and financial landscape, reshaping the rules surrounding campaign financing.

Under the electoral bonds scheme, any Indian citizen or entity established in the country could purchase electoral bonds, available in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. These 'bearer' instruments operated similarly to currency notes, allowing individuals, groups, or corporate organizations to buy and donate them to political parties of their choice. The receiving political parties could redeem the bonds, interest-free, after a 15-day period.

However, the court's decision noted that the unlimited corporate contributions permitted under the scheme were merely business transactions aimed at influencing policies. Previously, only a certain percentage of net profit was allowed for political donations.

In its order, the Supreme Court directed the issuing bank, the State Bank of India (SBI), to cease the issuance of electoral bonds. Furthermore, the SBI was instructed to submit details of bonds purchased since April 2019 until the present to the Election Commission of India (ECI).

The court mandated that the Election Commission must share this information on its official website. Additionally, electoral bonds that remain unredeemed should be returned. The decision aimed at bringing greater transparency to the electoral process and reducing the influence of corporate contributions on political decisions.

In response to the Supreme Court's ruling, the shares of State Bank of India (SBI) saw a nearly 2% gain, reaching Rs 756.30 as of 11:55 am on the National Stock Exchange (NSE). This positive market response suggests investors may view the decision as a step towards restoring accountability and transparency in political financing.

The State Bank of India has been given a six-week deadline to submit detailed information on parties that have received contributions since April 2019. This includes specifics on each bond encashed by political parties. The move is seen as a crucial step towards ensuring accountability in political funding and preventing any potential misuse of electoral bonds.

While the verdict has garnered positive reactions for its potential to curb corporate influence in politics, it also raises questions about alternative funding mechanisms for political parties. Policymakers will likely need to revisit and revamp the campaign financing framework to address concerns about transparency and ensure a fair electoral process.

As India reflects on this historic decision, it marks a turning point in the nation's commitment to ensuring a level playing field in political funding and reducing the influence of corporate entities on the democratic process.