AMENDMENTS TO THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

In the  last few  days many newspapers have been carrying articles on the woes of Non – Government Organisations (NGO’s) who have been left high and dry with the amendments (Foreign Contribution Regulation Amendment Act, 2020) (Amended Act) that the  BJP  led government has hurriedly passed, making life  difficult for them to receive foreign funds.

Historically, India at one point in time used to receive a lot of foreign funds and it was mainly for political and religious purposes and there was no regulation on receipt of such funds. In 2010, the UPA government brought in the Foreign Contribution Regulation Act 2010, restricting foreign contributions coming into India for political and religious activities.

Pursuant to the formulation of the above Act, it was mandatory for an NGO to register with the relevant authorities and due process had to be followed to receive funds from abroad. According to the Hon’ble Home Minister “The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act. Many of them were also found wanting in ensuring basic statutory compliances such as submission of annual returns and maintenance of proper accounts. This has led to a situation where the Central Government had to cancel certificates of registration of more than 19,000 recipient organisations, including non-Governmental organisations, during the period between 2011 and 2019.  Criminal investigations also had to be initiated against dozens of such non-Governmental organisations which indulged in outright misappropriation or mis-utilisation of foreign contribution, and therefore there was a necessity to bring in the Amendment Act”

A reading of the objects leads one to believe that to bring in transparency and accountability, the Government has proposed certain very important amendments. For example, including public servant, as a category which cannot receive foreign contributions.  Some of the other amendments include:

  • Prohibition to transfer foreign contribution to other person: Earlier an NGO registered to receive Foreign Contribution could transfer funds to a non-registered organisation as well. Now there is a blanket ban on an onward transfer of funds from the receiving NGO to another other person;
  • Restriction to utilise foreign contribution for administrative purpose- Expenses towards utilizing foreign contribution reduced to 20% from the existing 50%.
  • Registration of certain persons with Central Government- Under this section the government has amended it to include the right to carry out a summary enquiry and pending such inquiry to stop the NGO from using such unutilized foreign contribution;
  • Foreign contribution through scheduled bank – Earlier the person who was granted the certificate could open a bank account in any bank of his choice. He could open more bank accounts to utilize the foreign funds received by him through that main bank account.

The amendment strictly mentions that the person can receive foreign contribution only in an account designated as “FCRA Account”, which shall be opened by the person for the purpose of remittances of foreign contribution in such branch of the State Bank of India at New Delhi, as may be specified by the Central Government by notification.

However, he may open one or more accounts in other scheduled banks of his choice to which he may transfer the foreign funds received by him in the FCRA Account (SBI New Delhi) for utilizing it.

  • 12 A- This is an addition to section 12 seeking Aadhar and other ID proofs of office bearers and directors;
  • 13 – Extension of period upto which the Central Government can suspend the registration certificate : The amended Section 13 of FCRA provides the power to the Government to suspend the registration certificate (which means that foreign contribution cannot be received/ utilised) of a person for up to 360 days (which currently is 180 days) pending an inquiry for cancellation of FCRA registration.
  • 14 Cancellation of certificate-This is an additional section which was not there earlier; where a person may be permitted by the Central Government, to surrender the Certificate granted if it is satisfied that the person has not contravened any of the provisions of the Act, and the management of foreign contribution and asset created out of such contribution has been vested in the authority as provided in sub-section (1) of section 15.
  • Renewal of certificate-The amendment provides for the Central Government to make an inquiry to satisfy itself that the person who has applied for renewal has fulfilled all conditions specified in sub-section (4) of section 12, before renewing the certificate.

Whilst it is always good to bring in amendments to plug the loop holes, especially to keep a check on the foreign contributions coming into India, and therefore inclusion of provisions related to restricting administrative expenses to 20% and not permitting transfer of the funds is surely going to work towards transparency, it is definitely very difficult to understand how increasing bureaucracy helps brings transparency. Insisting on opening a bank account only with SBI New Delhi, right to summary Inquiry and seeking additional information and documents will only increase paperwork. The Government mentions that these amendments are being brought in, to ensure that NGO’s file annual returns etc, however none of the amendments are  with respect  to filing annual returns.

I believe that the first step any Government or law has to ensure is, to make it simple for the people and organisations, including NGO’s. Every law or amendment only adds additional paperwork and scares people taking up such activities proactively. Yes, foreign funds coming into the country for religious and political purposes must be stopped. However, India being a developing country I am sure  that foreign funds are very much needed for many other activities, by bringing in so many new processes, NGO’s will be crippled and shy to take up such activities which are much needed for India. Is it very difficult to bring in transparency and accountability, without increasing bureaucracy?

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