Foreign Contribution Regulation Act (FCRA)

Context: Ministry of Home Affairs (MHA) has suspended the FCRA registration of Think tank Centre for Policy Research (CPR).

About Foreign Contribution Regulation Act (FCRA):

• The Foreign Contribution Regulation Act (FCRA) was enacted during the Emergency in 1976 amid apprehensions that foreign powers were interfering in India’s affairs.
• 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”.
• The FCRA was amended in 2010 and 2020 by the government to give tighter control and scrutiny over the receipt and utilization of foreign funds by NGOs.

FCRA Registration:

• NGOs that want to receive foreign funds must apply online in a prescribed format with the required documentation.
• FCRA registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programs.
• Following the application by the NGO, the MHA makes inquiries through the Intelligence Bureau into the antecedents of the applicant, and accordingly processes the application.

Important highlights of the FCRA:

FCRA Requirements:

• Broadly, the FCRA requires every person or NGO seeking to receive foreign donations to be:
  • registered under the Act,
  • to open a bank account for the receipt of the foreign funds in State Bank of India, Delhi, and
  • to utilize those funds only for the purpose for which they have been received and as stipulated in the Act.
  • They are also required to file annual returns, and they must not transfer the funds to another NGO.
• Changes in FCRA Rules:
  • The Ministry of Home Affairs (MHA) in 2022 changed FCRA rules and increased the number of compoundable offences under the Act from 7 to 12.
  • The amendment also gave exemption from intimation to the government for contributions less than Rs 10 lakh – the earlier limit was Rs 1 lakh — received from relatives abroad, and increase in time limit for intimation of opening of bank accounts.
• Validity of FCRA Approval:
  • Once 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.
  • Once expired, the NGO is no longer entitled to receive foreign funds or utilize its existing funds without permission from the ministry.

Significance of regulating foreign contributions in India:

• Preventing interference in Indian affairs: The FCRA was enacted to prevent foreign powers from interfering in India’s affairs by regulating foreign donations to individuals and associations.
• Transparency and accountability: The FCRA ensures transparency and accountability which is important to prevent misuse of funds.
• National security: The FCRA also helps in safeguarding national security interests by preventing foreign entities from funding activities that could be detrimental to India’s security.
• Promoting social and economic development: Foreign contributions can be an important source of funding for social and economic development in India.

Challenges of regulating foreign contributions:

• Administrative Delays: The registration and renewal process under the FCRA can take a long time which delays their work and impact their ability to receive funding.
• Stringent Compliance Requirements: The FCRA registration process can be time-consuming and requires extensive documentation, while the rules on the utilization of funds are also strict.
• Political Interference: The government’s discretionary powers to cancel registrations or freeze accounts of NGOs have been misused in some cases to target NGOs critical of the government, leading to accusations of political interference
• Ambiguity in the Law: There is often ambiguity in the interpretation of the FCRA, leading to NGOs being exploited by authorities to target NGOs and curtail their activities.
• Lack of Clarity: There is a lack of clarity on the compliance requirements for foreign corporations and foundations operating in India leading to concerns about the transparency of their funding activities and potential influence on Indian civil society.

Way Forward:

Thus, It is an important law in India that seeks to regulate the receipt and utilization of foreign funds by individuals and NGOs in a manner consistent with the values of a modern democratic republic. While the FCRA has undergone amendments, the challenges in its implementation remain, such as the difficulty in balancing the need for transparency and accountability with the need to protect the autonomy of civil society organizations.

Source: Indian Express