FCRA and the Foreign Funding

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admin January 4, 2022
Updated 2022/01/04 at 2:45 PM

The Missionaries of Charity’s application for renewal of the Foreign Contribution (Regulation) Act registration was refused on December 25 for not satisfying eligibility standards and after “certain unfavourable inputs,” according to the Ministry of Home Affairs (MHA). The Missionaries of Charity, established in Kolkata by Mother Teresa, were registered under the FCRA through October 31, 2021; however, it was extended until December 31, 2021. The MHA further said that it did not block any Missionaries of Charity accounts, but that the State Bank of India notified it that the organisation had requested that its accounts be frozen, which the Missionaries of Charity confirmed.

Non-governmental organisation (NGO) licences are frequently examined and suspended if the MHA discovers any anomalies in their operations in the country.

What is the Foreign Contribution (Regulation) Act?

The Foreign Contribution (Regulation) Act (FCRA) of 2010 governs foreign donations and guarantees that they do not affect internal security. It was first implemented in 1976, but it was updated in 2010 with a plethora of new regulations to restrict foreign contributions. The FCRA applies to all associations, groups, and non-governmental organisations (NGOs) who want to accept foreign donations. All such NGOs are required to register under the FCRA, which is valid for five years and maybe extended provided they meet all of the requirements.

Foreign contributions may be made to registered organisations for social, educational, religious, economic, and cultural reasons. Annual returns, similar to those filed for income tax, are required. In 2015, the MHA issued new guidelines requiring NGOs to certify that accepting foreign funding would not affect India’s sovereignty and integrity, have a negative influence on amicable ties with any other country or undermine communal harmony. It further said that all such NGOs would be required to maintain accounts in either nationalised or private banks with core banking services, allowing security authorities real-time access.

Who cannot receive foreign donations?

Foreign contributions are prohibited for members of the legislature, political parties, government officials, judges, and journalists. However, in 2017, the MHA revised the 1976 repealed FCRA law via the Finance Bill route, allowing political parties to receive funds from a foreign company’s Indian subsidiary or a foreign corporation in which an Indian owns 50% or more shares.

According to legal experts, the change was prompted by allegations that the Bharatiya Janata Party and Congress had received foreign financing for political operations from the Vedanta Group of the United Kingdom between 2004 and 2012. In 2013, the Association of Democratic Reforms (ADR), a public advocacy organisation, filed public interest litigation (PIL) in the Delhi High Court against both parties for breaching the Foreign Contribution Regulation Act (FCRA) by receiving foreign funding. Both parties challenged a Delhi High Court order, which had termed the donations illegal in 2014, and moved to the Supreme Court. After the FCRA was retrospectively amended, they withdrew their applications before the Supreme Court.

The alternative option is to request prior authorisation to accept foreign donations. It is given in exchange for receiving a specified amount from a specific donor in order to carry out certain activities or initiatives. However, the association should be registered by statutes such as the Societies Registration Act of 1860, the Indian Trusts Act of 1882, or Section 25 of the Companies Act of 1956, among others. A letter of commitment from the overseas donor is also necessary, outlining the amount and purpose. The MHA suspended the FCRA of the Public Health Foundation of India (PHFI), one of India’s major public health advocacy organisations, in 2017 for lobbying MPs on tobacco control issues using “foreign cash.” The PHFI was put in the “prior authorization” category after many submissions to the government.

What happens if a registration is cancelled or suspended?

The MHA may suspend an association’s FCRA registration for a period of 180 days after inspecting its books and obtaining any negative feedback about its operations. Without approval from the MHA, the organisation cannot accept any new donations or use more than 25% of the funds available in the authorised bank account until a decision is made. The MHA has the authority to revoke an organization’s registration, after which it will be ineligible for registration or the granting of ‘prior authorization’ for three years. According to MHA statistics, since 2011, when the Act was amended, the registration of 20,664 organisations has been revoked for infractions such as misusing foreign contributions, failing to submit necessary yearly reports, and diverting foreign money for other purposes. There are 22,762 FCRA-registered NGOs as of December 29.

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