Foreign Contribution (Regulation) Act (FCRA)

In News

• Recently, CBI raids 40 locations linked to NGOs and MHA officials over alleged FCRA violations.

What is the FCRA?

• Background: The FCRA was enacted during the Emergency in 1976 amid apprehensions that foreign powers were interfering in India’s affairs by pumping money into the country through independent organisations.
  • These concerns were, in fact, even older; they had been expressed in Parliament as early as in 1969.
• Aim: The law sought to regulate foreign donations to individuals and associations so that they functioned in a manner consistent with the values of a sovereign democratic republic.
• Prohibition:
  • The Act prohibits the 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.

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

• State Bank of India’s New Delhi branch: 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.
• Designated FCRA account: All NGOs seeking foreign donations have to open a designated FCRA account at the SBI branch.
  • 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.
• Only banking channels allowed: Foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed.
• OCI or PIO: Donations are given in Indian rupees by any foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contributions.
• Sovereignty and integrity: It requires 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.

Major Criticisms

• Unnecessary International Criticism:
  • 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.
• NGOs involved in violation of FCRA:
  • Several pro­climate NGOs are focusing on advocacy against coal in the media.
  • It is considered a violation of FCRA provisions. 
• Biassed data and poor ranking on several Indices:
  • In 2017, the International Labour Organisation’s Global Slavery Index ranked India 53rd of 167 countries where 
    • “modern slavery” was prevalent, and 
    • as the country with the highest number of people in forced labour.
  • MHA questioned the credibility of the data.
• Internal Security:
  • 3 US non-governmental organisations were found to be fuelling protests at the Kudankulam Nuclear Project Site after strained Indo-US relations.
• Fraught issue for several years:
  • FCRA clearances have been a fraught issue for several years, and the government has often been accused of targeting NGOs for political or ideological reasons by cancelling or not renewing their clearances.

How else can one receive foreign funding?

• Prior permission: The other way to receive foreign contributions is by applying for prior permission.
  • A letter of commitment from the foreign donor specifying the amount and purpose is also required.
• Specific activities or projects: It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
• Registration: The association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.

When is a registration suspended or cancelled?

• The MHA: on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
  • The MHA can cancel the registration of an organisation which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.
• 25% of the amount available: Until a decision is taken, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount available in the designated bank account without permission of the MHA.

Governments Stand 

• The Government has contended that the amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters. 
• The changes are also needed to prevent malpractices by NGOs and the diversion of foreign funds. Preventing the possible diversion of funds is also the reason cited for reducing the administrative expense component, as some organisations tended to inflate the actual expenditure incurred.
• The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds. 
• The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely. 

Source: IE