Foreign Contribution (Regulation) Act & NGO’s

Syllabus: General Studies Paper 2

The Ministry of Home Affairs has cancelled the Foreign Contribution (Regulation) Act (FCRA) licence of Rajiv Gandhi Foundation (RGF) and Rajiv Gandhi Charitable Trust (RGCT), organisations that are associated with the Nehru-Gandhi family, for alleged violations of the provisions of the Act.

FCRA (Foreign Contribution Regulation Act)

• Foreign Contribution (Regulation) Act: It is an act of Parliament enacted in 1976 and amended in 2010 to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.
• It is applicable to all associations, groups, and NGOs which intend to receive foreign donations.
• Members of the legislature and political parties, government officials, judges, and media persons are prohibited from receiving any foreign contribution.
• However, in 2017 the FCRA was amended through the Finance Bill to allow political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.
• Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
• Purpose of Foreign contribution: Registered associations can receive foreign contributions for social, educational, religious, economic, and cultural purposes. The filing of annual returns on the lines of Income Tax is compulsory.

Provisions of the Act:

• Every person or NGO wishing to receive foreign donations to be registered under the Act,
• To open a bank account for the receipt of the foreign funds in State Bank of India, Delhi.
• To utilise those funds only for the purpose for which they have been received, and as stipulated in the Act.
• They are also required to file annual returns, and they must not transfer the funds to another NGO.
• The Act prohibits receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.

Ministry of Home Affairs (MHA) New Rules:

• In 2015, the MHA notified new rules which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
• It also said all such NGOs would have to operate accounts in either nationalized or private banks which have core banking facilities to allow security agencies access on a real-time basis.

Registration under FCRA

• NGOs that want to receive foreign funds must apply online in a prescribed format with the required documentation.
• The registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programmes.
• Post application, the MHA makes inquiries through the Intelligence Bureau into the antecedents of the applicant, and accordingly processes the application.
• The MHA is required to approve or reject the application within 90 days — failing which it is expected to inform the NGO of the reasons for the same.

Cancellation of approval

• The government reserves the right to cancel the FCRA registration of any NGO if it finds it to be in violation of the Act. 
• Registration can be cancelled for a range of reasons including, if “in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate”. 
• Once the registration of an NGO is cancelled, it is not eligible for re-registration for three years. 
• All orders of the government can be challenged in the High Court.

Foreign Contribution Regulation (Amendment), Act 2020

• Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered for that purpose. The amendment also forbids sub-granting by NGOs to smaller NGOs who work at the grassroots.
• Single FCRA account: The act states that foreign contributions must be received only in an FCRA account opened in the State Bank of India, New Delhi Branch. No funds other than the foreign contribution should be received or deposited in this account.
• Regulation: The Act states that a person may accept foreign contributions if 1. They have obtained a certificate of registration from the central government or 2. They have taken prior permission from the government to accept foreign contributions.  
• Aadhaar usage: The act makes it compulsory for all trustees to register their Aadhaar card with the FCRA account.
• Reduction in use of foreign contribution for administrative purposes: The Act decreases administrative expenses through foreign funds by an organisation to 20% from 50% earlier.

Criticisms about Amendment

• Significantly all the NGOs on the latest list work on climate change and environmental projects and/or child rights and slavery projects.
• These are the subjects where the government has been sensitive to international criticism.
• International Pressure regarding Law Making and over-compliance:
• Despite India’s record in complying with the Paris agreement, global pressures are intensifying on India to raise the Nationally Determined Contributions.
• It is detrimental to the Indian image and poverty reduction plans.