The SC-SBI Saga: What Happens to Electoral Bonds Now?

The SBI would not have matched the buyer and the depositor, as a bond has no serial number or any other identifier.

Why did the situation come to this sorry pass? What information the SBI is likely to file today? What is likely to happen after the information about the donors and political parties becomes publicly available?

(Photo: Vibhushita Singh/The Quint)

[This article was originally published on 12 March 2024 and is being reposted after the Election Commission released the electoral bonds data on 14 March 2024.]

The Supreme Court (SC) dismissed the petition of the State Bank of India (SBI) on 11 March and directed it to submit the details concerning electoral bonds to the Election Commission by the close of business hours on 12 March.

The SC, besides directing the SBI chairperson to file an affidavit after carrying out the compliance, also warned of initiating contempt proceedings if the SBI failed to follow its directions.

Why did the situation come to this sorry pass? What information is the SBI likely to file today? What is likely to happen after the information about the donors and the political parties becomes publicly available?

A Pragmatic Measure for Channelising Political Donations

The electoral bonds scheme was introduced in January 2018, as an alternative to the two schemes prevalent then, i.e., a completely transparent but hardly used company law scheme and a totally opaque cash donation scheme widely used for political donations.

The electoral bonds scheme did quite well.

Political funding of about Rs 15,000 crore was initiated in about six years of its existence before the SC declared it unconstitutional on 15 February this year.

The BJP received about 57 per cent of all donations.

What Exactly Did the Scheme Entail?

The SC, in its order of 15 February, directed the SBI to furnish by 6 March, information on all buyers, along with the date, denomination, and the amount of electoral bonds purchased. Similar information was directed to be furnished with respect to political parties.

The electoral bonds scheme prescribed a specific set of information to be collected for each buyer, which included, amongst others, critical information relating to the total number of electoral bonds applied for, denominations and number of the bonds applied for, the mode of payment, and the status of an applicant.

The scheme's notification mandated the SBI to treat the information collected from the buyers as ‘confidential’, and not to disclose it to any authority for any purpose, except when demanded by a competent court or upon registration of a criminal case by any law enforcement agency.

For political parties encashing electoral bonds, the scheme provided for the proceeds of the bonds to be credited only to specifically designated bank accounts of the parties in the SBI.

The scheme, thus, fully provided for the SBI to collect the information, which the Supreme Court directed it to furnish. The SBI did not furnish the same by the due date and asked for additional time, i.e., 30 June.

SBI Tried to Hide Behind Something It Wasn't Even Asked About

The SBI’s application reportedly stated, “...Due to the stringent measures undertaken to ensure that the identity of the donors was kept anonymous, ‘decoding’ of the electoral bonds and the matching of the donor to the donations made would be a complex process.”

The SBI also tried to use an alibi for the non-collection of information, immediately citing its internal SOP: “No details of Bond Purchaser including KYC and other details will be entered in CBS (core banking system).”

The SBI plea tried to muddy the waters further. The petition said; “The data related to the issuance of the bond and the data related to the redemption of the bond was kept recorded in two different silos.”Citing this as an unmanageable constraint, the SBI petition further argued: “It can thus be noted that both sets of information were being stored independently of each other. Thus, to re-match them would be a task requiring a significant amount of effort.”

The SBI proposed to do something that the SC did not even ask for: match the buyer of each electoral bond with its recipient political party. Quite obviously, the SBI invented the excuse of a “complex process” of matching the buyers of each bond with the political parties that received it, to push the furnishing of the information beyond the Lok Sabha elections (given their own deadline - 30 June).

Incidentally, the SBI would have never matched the buyer and the depositor of the electoral bonds. They had no serial number or any other identifier. The SBI was not supposed to and did not record any identifier of an electoral bond that could link its purchaser or depositor.

As none of the critical documents — application of the buyer, the electoral bonds, and the deposit slips — recorded any identifier, the SBI would never be able to decode and match electoral bonds with its buyer and depositor. The SC was understandably not impressed with the invented excuse of the SBI and dismissed its application.

What After the Information Becomes Available?

In all likelihood, the SBI will furnish the information of all the donors, along with the number of electoral bonds purchased on respective dates. This is easily available from its electronic database.

The SBI may also furnish a denominational break-up of the electoral bonds purchased on a specific date if it can open all the purchase applications and add this information to the number of bonds purchased. Likewise, the information for political parties regarding the amount, denomination, and date of contribution received through electoral bonds, would also be made available.

The government had a duty to the buyers of electoral bonds, who were promised statutory confidentiality of not linking their donations to the political parties. If anything, the government should have gone to the SC to review its order to the limited extent of not insisting on the disclosure of the past donations made.

As the government did not do this, the information regarding the buyers of all electoral bonds with dates and amounts (also possibly the denomination of the bonds) should be in the public domain soon when the Election Commission puts it out three days later.

The Association for Democratic Reforms and other petitioners/interested parties, however, would still not be able to see the link between the buyers of the bonds and the political parties they donated to. That might lead to further petitions in the court. Or else, data analytics might be used to try and figure this out by linking the dates of the purchase and deposit of bonds in every particular cycle.

This link, however, would never get credibly established as the bonds had no identifier, and its purchase and encashment process did not record any such identifier at any stage of the process.

(The author is a former Economic Affairs Secretary and Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)