Govt. releases new guidelines for banks under “Foreign Contribution (Regulation) Act”

Govt. releases new guidelines for banks under “Foreign Contribution (Regulation) Act”

The Ministry of Home Affairs has laid down a charter for banks which says that “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”. FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country.

What are the new FCRA guidelines?

As per the existing rules, all banks have to report to the Central government within 48 hours, the “receipt or utilisation of any foreign contribution” by any NGO, association or person whether or not they are registered or granted prior permission under the FCRA.

The donations received in Indian rupees by the NGOs and associations from any foreign source should be treated as a foreign contribution. Even if that source is located in India at the time of such donation.

It will include the contributions by foreigners of Indian origin like OCI or PIO cardholders, in Indian rupees (INR).

As per the existing rules, Banks need to report any receipt or utilization of any foreign contribution, by any NGO, association, or person. Banks should submit these reports to the Central government within 48 hours.

Rules cover all NGOs, whether they are registered or granted prior permission under the FCRA.

Any violation by the NGO or by the bank of these rules of FCRA may invite penal provisions under the FCRA Act, 2010.

Foreign Contribution (Regulation) Act

The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.

First enacted in 1976, it was amended in 2010 when a slew of new measures were adopted to regulate foreign donations.

The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA.

The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms. Registered associations can receive foreign contribution for social, educational, religious, economic and cultural purposes. Filing of annual returns, on the lines of Income Tax, is compulsory.

In 2015, the MHA notified new rules, which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.

It also said all such NGOs would have to operate accounts in either nationalised or private banks which have core banking facilities to allow security agencies access on a real time basis.

It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years, and it can be renewed subsequently if they comply with all norms.

In September 2020, the FCRA Act was amended by Parliament and a new provision was added. It makes it mandatory for all NGOs to receive foreign funds in a designated bank account at the State Bank of India (SBI) New Delhi branch.