FCRA Bill 2020: New Rules for NGOs to raise Foreign Funds

FCRA Amendment Bill has been introduced to assist the genuine organizations working for the welfare of the society and promote foreign contribution in India.

The Foreign Contribution (Regulation) Amendment Bill 2020 has been passed in the current Parliament session with a main aim to make specific changes to the FCRA law, which was initially passed in 2010. This predominantly concerned itself with the non-profit sector in our country viz: NGOs that implement development projects, research organizations etc. Foreign contribution almost turned up during the last ten years, but the sad part remained to be that most beneficiaries of foreign contribution failed to utilize the same for the commitment for which the initial registration was granted.
Because of this the Central Government was forced to cancel registration of more than 19,000 recipient organizations including some NGOs between the period of 2011 and 2019. All this gave rise to a need to organize the provisions of the initial Act by reinforcing the compliance mechanism and culpability in the receipt of foreign funds. Hence, this Bill was passed to assist the genuine organizations working for the welfare of the society and provide assurance to the foreign sources that provide grants to these organizations that their funds are being utilized for the appropriate purpose and promote foreign contribution in India.
Objective of the Amendments:
  • Between the period of 2010 and 2019 annual inflow of foreign contribution has doubled but many NGOs who have received the foreign contribution didn’t utilize the said funds for the purpose for which they were registered or granted prior permission under the FCRA 2010.
  • In view of same, the Union Home Ministry had to suspend licenses of the six NGOs who allegedly used the foreign contributions for religious conversion.
  • Many social organizations were not meeting the statutory compliances like filing of annual returns or maintenance of proper books of accounts which could adversely affect the internal security of the nation.
  • This new Bill is aimed to bring in transparency and accountability in receipt and utilization of foreign contributions and would provide support to the authentic NGOs or social organizations who have been working hard for welfare of the country.
Key Amendments:

1. Prohibition on Public Servants:
Section 3 of the FCRA 2010 provides a list of persons who are prohibited from receiving foreign contributions including election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others. The Bill has expanded the said list and has now barred public servants from receiving foreign contributions as well. Public Servants include any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
Reason behind imposing this prohibition is to prevent decision-making of people performing public duty or who are being remunerated directly by government from being affected due to foreign funding or misusing their powers to help the wrongful objectives of any foreign funders. However, this could restrict large section of genuine individuals who fall under the category of ‘public servants’ from carrying on their public welfare activities which might require foreign contributions.

2. Transfer of foreign contribution:
The Bill has prohibited the transfer of foreign contribution to any other person. Under the Bill, the term ‘person’ includes an individual, association or a registered company. Currently, the FCRA 2010 allows transfer of foreign contributions to persons who are registered to accept foreign contributions. This will help to control any illegal or inappropriate transfers and ensure the funds are utilized only for the purpose they have been raised.
 
But many times smaller NGOs who are ineligible to receive foreign contributions directly find it easier to use help of larger NGOs who have wide network, reach and infrastructure to receive such foreign contributions. With this amendment these small NGOs and social workers would be left in a lurch. These small NGOs/social workers are generally the ones who work the most at grassroot level. The mutually beneficial collaboration between small and large NGOs could be adversely affected by such amendment. This could further push the larger NGOs to work in isolation and not benefit from each other.
 
3. Mandatory Requirement of Aadhaar for registration: The Bill has introduced a new section which requires any person who seeking permission or applying for registration under FCRA (or its renewal) to provide Aadhaar number for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document. In case of a foreigner, a copy of their Passport or the Overseas Citizen of India (OCI) card is required for identification purpose.
 
This will help the Indian Government to maintain a database of people who are in control of the organizations receiving foreign contributions and it will further promote the importance and usage of the Aadhaar card in the country.
 
4. Reduction in the administrative expense cap: Under Section 8 of FCRA, the organizations could use 50% of the foreign contribution received for administrative expenses like payment of salaries, travel expenses, consumables like water/electricity, telephone charges, postal charges, rent and repairs to premise(s), and other expenses required to run an office. The Bill has reduced this limit to 20% i.e. from now on only 20% of the foreign contribution could be used for administrative expenses.
 
On one hand this will help control the misuse of foreign contribution by some of the NGOs and encourage the utilization of such funds towards the objective of the grant but on other hand this could raise difficulties for certain NGOs who have high administrative expenses due to their nature of business.
 
5. Opening of FCRA bank account: The Bill has specified that foreign contribution must be received only in an account which is designated as the ‘FCRA account’ in branches of the State Bank of India, New Delhi. The organizations cannot receive or deposit any other fund this account except foreign contribution. However, the person is allowed to open another FCRA account in any scheduled bank of their choice for keeping or utilizing the foreign contribution received in the FCRA account in the New Delhi branch of State Bank of India.
 
This will centralize the inflow of foreign contribution into one bank which will make it easier for the Indian Government to properly monitor and track the funds received under FCRA and ensure there is no fraudulent activity.
 
6. Utilization of Foreign Contribution: The Bill empowers the Central Government to prohibit a person to receive or utilize foreign contribution if based on an inquiry the government believes that such person has contravened provisions of the FCRA.
 
This is precautionary step which will enable the Government to prevent illegal receipt and utilization of foreign contributions in the cases where it finds prima-facie that the recipient is already contravening FCRA.
 
7. Provision to Surrender the Certificate: The Bill allows the Central Government to permit a person to surrender their registration certificate. Previously there was no such option available. The government may do so if, post an inquiry, it is satisfied that such person has not violated any provisions of the FCRA 2010, and the management of its foreign contribution has been vested in an authority prescribed by the government.
 
8. Time Limit for Suspension of Registration: Under the FCRA 2010, the government has the power to suspend the registration of an organization for a period of 180 days which could be further extended to an additional 180 days. The Bill has now allowed the government to suspend the registration certificate for up to 360 days instead of the current period of 180 days pending an inquiry for cancellation of FCRA registration.

Foreign Contribution (Regulation) Act (FCRA), 2010

Implemented by the Ministry of Home Affairs, FCRA regulates the foreign funding in India. Under the Act, individuals are permitted to accept foreign contributions without permission of MHA subject to the threshold of Rs. 25,000. The Act ensures that the organizations receiving the foreign contributions adhere to the stated purpose for which the funds have been raised. As per the FCRA, organizations are required to register themselves every five years.

Conclusion

The main objective of the Government in introducing this Bill is to bring limpidity and culpability in the overall compliance setup for NGOs and research organizations governed by the FCRA laws. However, on a closer look it seems there could be a little disagreement with the Government's stated object of the Bill to strengthen compliance mechanism, enhance transparency and accountability and facilitate genuine NGOs as these amendments might make the sector over-regulated and could raise certain concerns for NGOs especially in today’s crucial time wherein foreign funds are most needed for COVID19 related relief activities. Therefore, the idea of streamlining the process is commendable, but the Government needs to ensure that these changes don’t prove to be counter-productive due their timing.