MHA tightens rules on funds received by NGOs
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”
Relevance of Foreign Contribution (regulation) Act, 2010
The Foreign Contribution (regulation) Act, 2010 is an act of the Parliament of India. It is a consolidating act whose scope is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.
FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country.
The Parliament amended the FCRA, 2010 in September, 2020. One of the major amendments mandates compulsory opening of an FCRA account in the State Bank of India (SBI), Main Branch located at Sansad Marg, New Delhi by each NGO/association registered or given prior permission under FCRA 2010. Each existing FCRA registration holder as well as new applicant for registration or for prior permission would also have to comply with the same. This “FCRA account” of the NGO would be the first exclusive port of receipt of its FC in India
What is stated in the amended FCRA 2010?
The amended Section 17 of the FCRA, 2010 provides that every person who has been granted certificate or prior permission under section 12 shall receive foreign contribution only in an account designated as “FCRA Account” by the bank, which shall be opened by him for the purpose of remittances of foreign contribution in such branch of the State Bank of India at New Delhi, as the Central Government may, by notification, specify in this behalf
Such person may also open another ‘‘FCRA Account’’ in any of the scheduled bank of his choice for the purpose of keeping or utilising the foreign contribution which has been received from his ‘‘FCRA Account’’ in the specified branch of State Bank of India at New Delhi
Such person may also open one or more accounts in one or more scheduled banks of his choice to which he may transfer for utilising any foreign contribution received by him in his ‘‘FCRA Account’’ in the specified branch of the State Bank of India at New Delhi or kept by him in another ‘‘FCRA Account’’ in a scheduled bank of his choice
No funds other than foreign contribution shall be received or deposited in any such account.
MHA lays out guidelines to make the NGOs and the banks comply with new provisions
The charter for the banks said 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.
The charter also provided an illustrative (but not exhaustive) list of such contributions which are Foreign Contribution as defined under the FCRA, 2010:
- Donations given in Indian rupees (INR) by any foreigner/Foreign Source including foreigners of Indian origin like OCI or PIO cardholders (in SBI, New Delhi Main Branch)
- Donations received in Indian rupees (INR) from any ‘foreign source’ even if that source is located in India at the time of such donation (in SBI, New Delhi Main Branch).
- FC received in cash/local cheque/demand draft or through overseas bank transfers in any currency including Indian rupees from any “foreign source” (in SBI, New Delhi Main Branch).
- All interest that accrues on the FC received in any bank account including interest on FDs (in any Bank Branch).
- Any income generated in India from assets created by spending the funds from FC. This includes proceeds from sales of such assets which have been credited even partly by spending the FC (in any Bank Branch).
- Proceeds from sale of FC received in kind or in the form of securities (in any Bank Branch).
- Re-depositing the unutilised FC which might have been drawn out as advance for any purpose by the NGO/association. Such a redeposit, however, must be backed by matching withdrawal entries and relevant records to establish that it was unutilised/unspent FC amount. This would include any refund received on account of cancellation of any services/tickets etc. sought to be taken by utilising FC (in any Bank Branch).
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 Rs 1 lakh. Any such transaction above Rs 1 lakh will have to be informed to MHA.
MHA also laid 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.”