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India tightens oversight on funds received by NGOs

New guidelines to banks on Foreign Contribution (Regulation) Act rules.

Vijaita Singh
NEW DELHI, JANUARY 29, 2021 UPDATED: JANUARY 30, 2021 

The Ministry of Home Affairs (MHA) has laid down a charter for banks which says that “donations received in Indian rupees” by non-governmental organisations (NGOs) and associations from “any foreign source even if that source is located in India at the time of such donation” should be treated as “foreign contribution”.

As per the existing rules, all banks have to report to the Central government within 48 hours, the “receipt or utilisation of any foreign contribution” by any NGO, association or person whether or not they are registered or granted prior permission under the FCRA.

The Hindu Explains | What is Foreign Contribution (Regulation) Act, and how does it control donations?

Last September, the Foreign Contribution (Regulation) Act, 2010, was amended by Parliament and a new provision that makes it mandatory for all NGOs to receive foreign funds in a designated bank account at the State Bank of India’s New Delhi branch was inserted.

FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country.

All NGOs seeking foreign donations have to open a designated FCRA account at the SBI branch by March 31.

Also read | Home Ministry amends FCRA rules

The NGOs can retain their existing FCRA account in any other bank but it will have to be mandatorily linked to the SBI branch in New Delhi.

Penal provisions

The Ministry has laid out a series of guidelines and charter to make the NGOs and the banks comply with the new provisions.

The charter for the banks said, “It may be noted that foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed. Any violation by the NGO or by the bank may invite penal provisions of The FCRA, 2010.” It added that “donations given in Indian rupees (INR) by any foreigner/foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contribution.

Also read | ‘FCRA Bill virtually makes it impossible for NGOs to function’

Recently the National Investigation Agency (NIA) registered a case against Sikhs for Justice (SFJ), a foreign based group that advocates secessionist and pro-Khalistani activities in India.

NIA summoned 40 people, all associated with the ongoing farmers agitation, to join the probe in the case where it alleged that large amounts of funds being collected by Khalistani terrorist outfits are being sent through NGOs to pro-Khalistani elements based in India.

In 2019, MHA had amended FCRA rules where it said that even persons prohibited to receive foreign funds such as journalists, politicians, members of the judiciary “are allowed to accept foreign contribution from their relatives” if the amount does not exceed ₹1 lakh. Any such transaction above ₹1 lakh will have to be informed to MHA.

MHA also said down “good practices” to be followed by NGOs in accordance with standards of global financial watchdog- Financial Action Task Force (FATF). It asked NGOs to inform the Ministry about “suspicious activities” of any donor or recipient and “take due diligence of its employees at the time of recruitment.”

FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country. The Act, first enacted in 1976 was amended in the year 2010 and then 2020.