FCRA regulation issue: Most NGOs don’t have SBI account

Context:

• An Assam-based NGO has moved the Gauhati High Court against another amended provision of the Foreign Contribution (Regulation) Act (FCRA) that makes Aadhaar mandatory for opening and operating the account in Delhi.
• Only 16% registered NGOs have active bank accounts with the State Bank of India’s main branch in Delhi, a compulsory requirement to receive foreign funds from April 2021.

Relevance:

GS-II: Polity and Governance (Government Policies & Interventions, Non-Governmental Organisations -NGOs), GS-III: Indian Economy (External Sector, Mobilization of Resources)

Dimensions of the Article:

1. Foreign Contribution (Regulation) Act, 2010
2. Foreign Contribution (Regulation) Amendment Act, 2020
3. Non-Governmental Organisations (NGOs) in India
4. Why have NGOs been controversial recently?
5. About the recent MHA guidelines regarding FCRA and NGOs
6. About the recent case in Gauhati HC regarding NGOs

Foreign Contribution (Regulation) Act, 2010

The Foreign Contribution (regulation) Act, 2010 is a consolidating act whose scope is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.

Key Points regarding FCRA

• Foreign funding of voluntary organizations in India is regulated under FCRA act and is implemented by the Ministry of Home Affairs.
• The FCRA regulates the receipt of funding from sources outside of India to NGOs working in India.
• It prohibits the receipt of foreign contribution “for any activities detrimental to the national interest”.
• The Act held that the government can refuse permission if it believes that the donation to the NGO will adversely affect “public interest” or the “economic interest of the state”. However, there is no clear guidance on what constitutes “public interest”.
• The Acts ensures that the recipients of foreign contributions adhere to the stated purpose for which such contribution has been obtained.
• Under the Act, organisations require to register themselves every five years.

Foreign Contribution (Regulation) Amendment Act, 2020

• The Act bars public servants from receiving foreign contributions. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
• The Act prohibits the transfer of foreign contribution to any other person not registered to accept foreign contributions.
• The Act makes Aadhaar number mandatory for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document.
• The Act states that foreign contribution must be received only in an account designated by the bank as FCRA account in such branches of the State Bank of India, New Delhi.
• The Act proposes that not more than 20% of the total foreign funds received could be defrayed for administrative expenses. In FCRA 2010 the limit was 50%.
• The Act allows the central government to permit a person to surrender their registration certificate.

Non-Governmental Organisations (NGOs) in India

• Worldwide, the term ‘NGO’ is used to describe a body that is neither part of a government nor a conventional for-profit business organisation.
• NGOs are groups of ordinary citizens that are involved in a wide range of activities that may have charitable, social, political, religious or other interests.
• In India, NGOs can be registered under a plethora of Acts such as the Indian Societies Registration Act, 1860, Religious Endowments Act,1863, Indian Trusts Act, etc.
• India has possibly the largest number of active NGOs in the world.
• Ministries such as Health and Family Welfare, Human Resource Department, etc., provide funding to NGOs, but only a handful of NGOs get hefty government funds.
• NGOs also receive funds from abroad, if they are registered with the Home Ministry under the Foreign Contribution (Regulation) Act (FCRA). There are more than 22,500 FCRA-registered NGOs.
• Registered NGOs can receive foreign contribution under five purposes — social, educational, religious, economic and cultural.

Why have NGOs been controversial recently?

• An Intelligence Bureau (IB) report, submitted to the PMO and National Security Adviser in 2019, alleged that several foreign-funded NGOs were stalling India’s economic growth by their obstructionist activism.
• In 2015, the Home Ministry had cancelled the FCRA licences of 10,000 organisations.
• The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution are being not utilised the same for the purpose for which they were registered or granted prior permission under amended provisions of the FCRA 2010.
• Recently, the Union Home Ministry has suspended licenses of the six (NGOs) who were alleged to have used foreign contributions for religious conversion.
• Recently the National Investigation Agency (NIA) registered a case against a foreign based group that provides funds for secessionist and pro-Khalistani activities in India.

About the recent MHA guidelines regarding FCRA and NGOs

• The Ministry of Home Affairs (MHA) issued new regulating guidelines to banks under Foreign Contribution (Regulation) Act, 2010. It states that the donations received in Indian rupees by non-governmental organisations (NGOs) and associations from any foreign source (even if that source is located in India at the time of such donation) should be treated as foreign contribution.
• Under the issued regulations, donations given in Indian rupees (INR) by any foreigner/foreign source including foreigners of Indian origin like Overseas Citizen of India (OCI) or Person of India Origin (PIO) cardholders should also be treated as foreign contribution.
• The guidelines mandate that good practices should be followed by NGOs in accordance with standards of global financial watchdog- Financial Action Task Force (FATF).
• MHA asked NGOs to inform the Ministry about “suspicious activities” of any donor or recipient and “take due diligence of its employees at the time of recruitment.”

About the recent case in Gauhati HC regarding NGOs

• The Gauhati High Court sent a notice to the SBI asking it to explain why Aadhaar was necessary to open a bank account, when in 2018, the Supreme Court in the K.S. Puttaswamy (Aadhaar) case had ruled that mandatorily linking Aadhaar to a bank account “does not satisfy the test of proportionality”.
• According to the amended provisions of the FCRA enacted in September 2020, the NGOs registered under the Act were asked to open a designated bank account at the SBI, Delhi and compulsorily register the Aadhaar details of the chief functionaries, trustees and office-bearers.
• The amendment stated that all the existing FCRA accounts of the NGOs will be linked to the SBI account in Delhi, and while they may not be able to receive fresh foreign funds from April 1 in the existing accounts, they could utilise the money that already exists in the old account.
• Due to the COVID-19 pandemic, many NGOs could not complete the stringent paper work, making it impossible for foreign donors to send help during the second wave that has now spread to rural areas. Many said that they did not fulfil the eligibility criteria as they did not possess an Aadhaar card as a “matter of principle”.

-Source: The Hindu