What is FCRA, the Law Related to NGO Funding?

Context

FCRA frequently appears in the news in the context of regulating the functioning of NGOs, Activists, etc.

Probable Question

The Foreign Contribution (Regulation) Act (FCRA) is critical for security and sovereignty of the nation, however it can be used to silence the dissenting voices against the power. Do you agree?

About the Foreign Contribution (Regulation) Act (FCRA)

• FCRA regulates foreign donations to individuals and associations.
• It was enacted during the Emergency in 1976, due to the apprehensions that foreign powers were pumping money using independent organizations to interfere in Indian affairs.
• The FCRA requires every person or NGO seeking to receive foreign donations to be:
  • To register under the Act.
  • To open a bank account for the receipt of the foreign funds in State Bank of India, Delhi.
  • To utilize those funds only for the purpose for which they have been received and as stipulated in the Act.
  • To file annual returns,
  • They must not transfer the funds to another NGO.
• Following are Prohibited from the receipt of foreign funds:
  • Candidates for elections,
  • Journalists or newspaper and media broadcast companies,
  • Judges and government servants,
  • Members of legislature and political parties or their office-bearers,
  • Organizations of a political nature. (However, in 2017 the MHA, through the Finance Bill route, amended the 1976-repealed FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.)

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Procedure for Granting FCRA Registration

FCRA registrations are granted in following way to individuals or associations (in want of foreign funds) that have definite cultural, economic, educational, religious, and social programmes:

• NGOs must apply online in a prescribed format with the required documentation.
• The MHA then makes inquiries through the Intelligence Bureau into the antecedents of the applicant, and accordingly processes the application.
• Under the FCRA, the applicant should not be:
  • Fictitious or benami;
  • Prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;
  • Prosecuted or convicted of creating communal tension or disharmony;
  • Found guilty of diversion or misutilisation of funds;
  • Engaged or likely to be engaged in the propagation of sedition.
• The MHA is required to approve or reject the application within 90 days.
• In case of failure to process the application in the given time, the MHA is expected to inform the NGO of the reasons for the same.

For How Long is Approval Granted?

• FCRA registration is valid for five years.
• NGOs are expected to apply for renewal within six months of the date of expiry of registration.
• In case of failure to apply for renewal, the registration is deemed to have expired, and the NGO is no longer entitled to receive foreign funds or utilize its existing funds without permission from the ministry.
• According to the MHA, NGOs failing to apply before the due date can petition the ministry with cogent reasons within four months of the expiry of registration, following which their applications can be reconsidered.

On What Basis Can Approval be Canceled?

• The government reserves the right to cancel the FCRA registration of any NGO in case of violation of the Act like:
  • If an inquiry finds a false statement in the application;
  • If the NGO is found to have violated any of the terms and conditions of the certificate or renewal;
  • If it has not been engaged in any reasonable activity in its chosen field for the benefit of society for two consecutive years;
  • If it has become defunct.
  • If the Central Government is of the opinion that it is necessary in the public interest to cancel the certificate.
  • In case an audit finds irregularities in the finances of an NGO in terms of misutilisation of foreign funds.
• According to FCRA, no order of cancellation of certificate can be made unless the person or NGO concerned has been given a reasonable opportunity of being heard. 
• After the cancellation of registration of an NGO, it is not eligible for re-registration for 3 years.
• The ministry can also suspend an NGO’s registration for 180 days pending inquiry, and can freeze its funds.
• All orders of the government can be challenged in the High Court.

Recent Amendments

• To “consolidate the law” on utilization of foreign funds, and “to prohibit” their use for “any activities detrimental to national interest” the act was amended FCRA in 2010 .
• It was again amended in 2020, giving the government tighter control and scrutiny over the receipt and utilization of foreign funds by NGOs.
• Some of the amendments included by both the Acts (of 2010 and 2020) are
  • Foreign contributions could only be received in designated FCRA Accounts.
  • Received foreign contributions shall not be transferred to any other persons or association, etc.
  • Receivers must not use more than 20% of the contribution for meeting administrative expenses.
• FCRA Rules were also amended multiple times. Under the new rules,
• The candidates (who are Prohibited from the receipt of foreign funds) will no longer be prosecuted if they receive foreign contributions from relatives abroad and fail to intimate the government within 90 days. However, the recipient will be required to pay 5% of the foreign contribution received.
• In 2022, the MHA effected changes to FCRA rules through two gazette notifications and has made following changes:
  • It has increased the number of compoundable offenses under the Act from 7 to 12.
  • Exemption from intimation to the government for contributions less than Rs 10 lakh (the earlier limit was Rs 1 lakh) received from relatives abroad.
  • Increase in time limit for intimation of opening of bank accounts.

Has the FCRA been used to Target Certain NGOs?

• Until 2011, there were more than 40,000 NGOs registered under FCRA in India. That number now stands at 16,000.
• The previous government had cracked down on NGOs and canceled the registration of almost 4,000 NGOs.
• Greenpeace India is also under the scanner for FCRA violations.
• Also, Amnesty International, which was first granted FCRA registration in 2000, was not allowed renewal of its registration by the then government.

Now that you have reached here, watch this related video on the topic Challenges with NGO for UPSC CSE Preparation, by M. Puri Sir, our faculty for Polity and Governance:

NGOs Have Been Accused of Violating FCRA Provisions

• Several international and well-known NGOs such as Compassion International, Greenpeace India, Sabrang Trust, Lawyers’ Collective, Amnesty International, and Ford Foundation have come under the government’s scanner for alleged violations of FCRA.
• Allegations ranges from money laundering, terror financing, diverson of money to other than the permitted puposes, conversion missionaries, etc.

Foreign funding plays an important role in effective and efficient functioning of the NGOs and civil society organizations. However, reports of misuse and apprehension of threats to national security cannot be ignored. While protecting the democratic values, regulations of foreign funding are critical to ensure sovereignty and security of the nation. Therefore, FCRA plays an important role in scanning and ensuring safe use of foreign funds, however it shall not be used to silence dissent and constructive criticism of the parties in power.

News Source:

https://indianexpress.com/article/explained/everyday-explainers/what-is-fcra-ngo-funding-mha-explained-8026895/

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