Following the Supreme Court’s rebuke of the State Bank of India’s request for an extension in the electoral bond’s deadline, there was a notable decline in the bank’s share price. On Monday, the apex court dismissed SBI’s plea for an extension to reveal data associated with electoral bonds, leading to a substantial dip in the bank’s shares soon after the court’s decision.
SBI shares experienced a nearly 2 percent decline following the Supreme Court’s dismissal of the bank’s plea and its directive to submit data by March 12. Due to that the shares were valued at ₹773, marking a ₹15 drop from the previous day’s close.
The intraday low for SBI was ₹771, representing a 2 percent decrease compared to the previous day. Analysts attribute the share decline not only to the Supreme Court’s decision but also to the overall bearish sentiments in the Indian stock market, as per Mint’s report.
Furthermore, experts indicate that the decrease in SBI’s share prices is likely a short-term impact and should not significantly affect the PSU banking sector. They suggest that this downturn could be considered an opportunity for medium and long-term investors.
On Monday, a constitution bench consisting of Chief Justice of India DY Chandrachud and Justices Sanjiv Khanna, BR Gavai, JB Pardiwala, and Manoj Misra directed the State Bank of India to reveal comprehensive information related to electoral bonds on March 12.
Electoral bonds case: What Supreme Court said
In its initial ruling, the court mandated the bank to provide comprehensive information on the electoral bonds acquired from April 12, 2019, to February 15, 2024. This information includes the purchase dates, purchaser names, bond denominations, as well as details regarding the bonds redeemed by political parties, encompassing the dates of encashment and denominations of the electoral bonds.
The bank contended that the process of gathering, verifying, and disclosing the data would be time-consuming, as the information was stored in two separate “silos” to uphold the confidentiality of both parties involved. The bank expressed the need for additional time to comply, emphasizing that they were instructed to treat the matter with confidentiality.
However, the Supreme Court denied the State Bank of India’s request for an extension of the deadline to disclose electoral bonds data until June 30. The previous hearing had set a deadline of March 6 for this disclosure, and the Election Commission of India was instructed to make the data public by March 13. In response to SBI’s application today, the bench ruled that the information sought by SBI is readily available. Consequently, the application for an extension until June 30 was rejected, and SBI was directed to reveal the details by the close of business hours on March 12, 2024.
The Constitution bench issued a caution to the State Bank of India, stating that it could face contempt of court charges if it deliberately disobeys the latest directives. While refraining from immediately invoking contempt jurisdiction, the bench put SBI on notice, asserting that the court would take action for willful disobedience if the bank fails to adhere to the specified timelines in this order.
What is Electoral Bond Scheme?
The electoral bond scheme, introduced in 2017, revolutionized political funding in India. Electoral bonds (EBs) function as “bearer” instruments, similar to currency notes. They are available for purchase in various denominations, including 1,000 rupees ($12), 10,000 rupees ($120), 100,000 rupees ($1,200), 1 million rupees ($12,000), and 10 million rupees ($120,000). It allowed both individuals and corporate entities to contribute unlimited funds to political parties anonymously. Until a significant Supreme Court decision in mid-February, which resulted in the cancellation of the seven-year-old election funding system just weeks before the upcoming Lok Sabha elections in April-May, donors could purchase these bonds in fixed denominations from the State Bank of India (SBI). Subsequently, the donors would present these bonds to any political party, which could then redeem them through a bank account. Notably, the unique feature of electoral bonds was that the beneficiary political parties were not required to disclose the donor’s identity to anyone, including the Election Commission of India (ECI).
In conclusion, the State Bank of India faced a decline in its share price following the Supreme Court’s rejection of its plea for an extension in the electoral bond’s disclosure deadline. The court’s directive to disclose comprehensive information on electoral bonds added pressure on the bank, contributing to the share price dip. Despite the short-term impact on SBI’s shares, experts believe it won’t significantly affect the PSU banking sector. The court’s emphasis on transparency in electoral funding through the electoral bond scheme highlights a broader concern about the confidentiality of political contributions. The ongoing developments underscore the delicate balance between maintaining confidentiality and ensuring transparency in the political financing landscape, raising crucial questions about the accountability of financial contributions to political parties in India.
