The Ministry of Law and Justice notified the Foreign Contribution (Regulation) Amendment Act 2020 (FCRA Amendment Act) which amends the existing provisions of the Foreign Contribution Regulation Act 2010 (FCRA) after receiving assent of the President of India on the 28th September, 2020.

The FCRA Amendment Act brings in a slew of amendments to the FCRA in relation to restrictions on the type of entities receiving foreign contribution, restrictions on transfer and utilisation of funds, additional conditions for obtaining registration/permissions and provisions on renewal/suspension/surrender of certificate of registration under FCRA.

Further, Act aims at increasing transparency by introducing the requirement to provide Aadhaar, empowering the government to conduct an inquiry into the affairs of the person registered under the FCRA and introducing a requirement of mandatory ‘FCRA Account’. Here we have a look about changing functioning style for NGO’S Operating in India.

Changing Paradigm For NGO’s In FCRA

Changes in NGO Functionality after Amendment

√ Restriction on NGO’s from acting as fundraisers and channeling funds to other NGO’s

√ Flexibility to the recipient to open another “FCRA Account” for the purpose of keeping or utilizing the foreign contribution

√ Stringent identification requirements of NGO’s office bearers or directors or other key functionaries

√ Centralize the inflow and routing of foreign contribution amount received by NGO’s

√ Decrease the cap on using the foreign contribution for administrative expenses from 50% to 20%

Extended power of authority after Amendment

√ Power to suspend the registration certificate for up to 360 days

√ Permit a person to voluntarily surrender registration certificate

√ After surrender, management of foreign contribution (related assets) shall be vest in authority

ANALYSIS POINTS

♦ In times of COVID-19, NGOs needed more relaxations

Amendment proved an absolute model of control over and above the rules, regulation and certification processes, it would stifle this sector and the spirit of cooperation and collaboration

Amendment come at a time when India’s global rankings on democratic freedoms are in sharp decline, undoubtedly have a deeply chilling effect on dissent and the freedoms of expression, assembly and association

♦ Small NGO’S destroyed with one stroke

All large NGOs collaborate with smaller NGOs which are there at the grassroots level – they do not have the capability of raising money or writing reports but do the real work.

Large NGOs support them to do the real work and raise funds and write report and support them as an intermediary organization. Due to prohibition to transfer funding to any other person would mean the end of the small NGOs

♦ Impact on research

With the limit for expenditure for administrative purposes being reduced from 50% to 20% of the donations, NGO’s will not be able to do any research–be it international or national. NGO’s won’t be able to collaborate with universities or research institutes

Closer look at the Statistics

> Active NGO’S actually registered and operating under the act constitute less than 1% of total number of NGO’S operating in India

> FCRA registration of 1807 NGO’S cancelled in 2019

FCRA registration cancelled mostly due to their failure to submit annual income & expenditure statement on foreign funding for up to six year despite repeated reminders

COMPARATIVE ANALYSIS IN NEW & OLD ACT

S. No. THE FOREIGN CONTRIBUTION
(REGULATION)
AMENDMENT ACT, 2020
FOREIGN CONTRIBUTION
(REGULATION) ACT, 2010
1. Prohibition on “public servant” from receiving foreign contributions No prohibition was in old act for “public servant” from receiving       foreign contribution
2. Recipient to receive foreign  contribution amount only in an account designated as “FCRA Account“ in a branch of the State Bank of India (SBI) at New Delhi. 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

  • No funds other than foreign contribution shall be received or deposited in any such account
Recipient was permitted to receive foreign contribution in an account
opened in any of the scheduled banks
3. Prohibition on transfer of foreign contribution to any person NGO was permitted to transfer foreign contribution received to: (i) any other registered NGO; and

(ii) any other unregistered person,with prior permission of the Ministry of Home Affairs

4. Provision of Aadhaar cards of all office bearers or directors or other key functionaries or, in case of foreigners, a copy of passport or overseas citizen of India card for registration or renewal There was no such provision
5. Cap on using the foreign contribution for administrative expenses = 20% Cap on using the foreign contribution for administrative expenses = 50%
6. Government has power to suspend registration certificate of a person for up to 360 days Government could suspend the registration of a person for a period not exceeding 180 days

Move towards New operating models

International donors will face vastly increased transaction costs even if they are able to find alternate means to identify such groups

Indian nonprofits, on the other hand, will be starved of resources to invest in technology, capacity building, and research

Organizations, together with local offices of INGOs and international donor organizations will have to entirely revisit their operating models

“As I have said, the first thing is to be honest with yourself. You can never have an impact on society if you not changed yourself…Great peacemakers are all people of integrity, of honesty, but humility.”-Nelson Mandela

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DISCLAIMER: Views expressed are that of the author based on the information/data as on the date of compilation by author for general informational use of the reader and should not be basis for action. For any actions expert opinion must be sought separately, author shan’t be liable for any actions/omission opinions framed by the user on the basis of this article in any circumstances.

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