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What is Foreign Contribution (Regulation) Act, 2010? Know everything about it

What is Foreign Contribution (Regulation) Act, 2010? Know everything about it


  • GS 2 || Governance & Social Justice || Other Aspects of Governance || NGOs & Pressure Groups

Why in the news?

Recently, The Supreme Court asked 6,000-odd NGOs to go back to the government for redressal of their grievances on non-renewal of their Foreign Contribution Regulation Act (FCRA) registration.

NGO Global Peace Initiative had petitioned the court that the NGOs should be allowed to continue receiving and utilizing foreign funds until the pandemic is over.

What is FCRA (Foreign Contribution Regulation Act)?

  • Foreign Contribution (Regulation) Act: This is a law passed by Parliament in 1976 and updated in 2010 to regulate foreign donations and guarantee that they do not jeopardize national security.
  • Applicability: It applies to all associations, groups, and non-governmental organizations (NGOs) that plan to accept foreign funds.
  • Who is ineligible to receive foreign donations?
    • Foreign contributions are illegal for members of the legislature and political parties, government officials, judges, and journalists.
  • However, the FCRA was revised in 2017 by the Finance Bill, allowing political parties to receive contributions from a foreign firm’s Indian subsidiary or a foreign company in which an Indian owns 50% or more shares.
  • Registration: All such NGOs are required to register under the FCRA. The registration is valid for five years at first, and it can be renewed if all requirements are met.
  • Foreign contribution purpose: Foreign contributions can be made to registered associations for social, educational, religious, economic, and cultural objectives. Annual returns, similar to those filed for income tax, are required.

Foreign Contribution (Regulation) Act (FCRA), 2010:

  • Foreign funding of individuals in India is governed by the Foreign Contribution Regulation Act (FCRA), which is enforced by the Ministry of Home Affairs.
    • Individuals may accept foreign contributions without the consent of the MHA.
    • The monetary limit for accepting such overseas contributions, however, shall not exceed Rs. 25,000.
  • The Act ensures that receivers of foreign donations stay true to the stated purpose for which they were received.
  • Organizations are required to register every five years under the Act.
  • Foreign contributions can be made to register NGOs for five different reasons: social, educational, religious, economic, and cultural.

Ministry of Home Affairs (MHA) New Rules:

  • In 2015, the MHA issued new guidelines requiring NGOs to certify that accepting foreign funding will not jeopardize India’s sovereignty and integrity, have a negative influence on amicable relations with any other country, or disrupt communal harmony.
  • It further stated that all such NGOs would be required to maintain accounts in either nationalized or private banks with core banking services, allowing security agencies real-time access.

Key provisions of FCR (Amendment), Act 2020:

  • Prohibition on accepting foreign contributions:
    • Add some public workers to the list of those who are not allowed to take foreign contributions: Election candidates, newspaper editors and publishers, judges, government employees, members of any legislature, and political parties are all examples.
    • The bill expands this list to include public employees. Any individual in the government’s service or pay, or remunerated by the government for performing any public responsibility, is considered a public servant.
  • Transfer of foreign contributions: The Act prohibits the transfer of foreign contributions to anybody who is not likewise registered to accept foreign contributions.
  • FCRA account: Foreign contribution must be received exclusively in an account designated by the bank as an FCRA account in such branches of the State Bank of India, New Delhi, according to the Bill. This account should not receive or deposit any funds other than the foreign contribution.
  • Persons are defined as: The FCRA 2010 allows foreign contributions to be transferred to persons who have registered to accept foreign contributions. An individual, an organization, or a registered comma are all considered “persons” under the Bill.
  • Regulation: According to the Act, a person may accept foreign donations if they have obtained a certificate of registration from the central government or have received previous approval from the government. The measure mandates the use of Aadhaar for registration.
  • Restrictions on the use of foreign contributions: The bill grants the government the authority to conduct a “summary inquiry” into an organization’s use of foreign funds.
  • Reduction in the use of foreign contributions for administrative purposes: The law reduces an organization’s administrative expenses from 50% to 20% using foreign donations.
  • Certificate surrender: The Bill allows a person to surrender their registration certificate to the national government.

Need for:

  • To keep an eye on money laundering: The government claimed in Parliament that foreign money was being utilized for religious conversions. For example, in 2017, the government outlawed Compassion International, a Christian organization based in the United States.
  • To keep an eye on misappropriated funds: The government claimed in Parliament that foreign money was being utilised for religious conversions. For example, in 2017, the government outlawed Compassion International, a Christian organisation based in the United States.
  • To avoid a loss of GDP: During the NPA period, an official report was published calculating the GDP losses purportedly incurred by environmental NGOs, revealing a foreign conspiracy against India. According to the I.B. report of I.B., India loses 2-3% of the GDP per Year.
  • Way to improve transparency and accountability: Between 2010 and 2019, the annual inflow of foreign contributions nearly doubled, yet many foreign contribution receivers have not used the funds for the purposes for which they were registered or granted prior approval under the aforementioned Act.
  • Why to control non-governmental organizations: Many people were not complying with legislative requirements such as filing yearly returns and keeping necessary records.

Issues associated:

  • NGO Overregulation: New regulations impose onerous requirements on civil society organizations, as well as educational and research institutions that collaborate with foreign corporations.
  • Lack of Consensus: The amendments were not addressed with stakeholders and were enacted in Parliament with little debate.
  • Against Constitutional rights: The United Nations Human Rights Council resolution on protecting human rights defenders says that no law should criminalize or delegitimize activities in defense of human rights on account of the origin of funding.
  • Discourage social work: Thousands of non-governmental organizations (NGOs) support the world’s poorest people. Only the presumption of guilt against them all, followed by control, limits their ability to act freely.
  • Selective barriers: Overregulation appears to be directed at some categories of global concepts and ideals, such as ecology, human rights, and civil liberties.
  • Reduce investment and technology flow: India has been proactive in seeking global finance and technology as a growing nation. FCRA’s strict requirements will have an impact on investments.
  • Against Indian cultural ethos: Prime Minister Narendra Modi has frequently invoked the ancient Indian ethos of Vasudhaiva Kutumbakam as the underpinning for the country’s international engagement. New rules are incompatible with India’s reasonable desire to become a global participant.
  • Additional compliance costs: Every FCRA-registered NGO would be required to open an FCRA-marked bank account with a State Bank of India branch in New Delhi. Around 93 percent of FCRA NGOs are registered outside of Delhi, and will now be required to create a bank account there.
  • Lowering the administrative expense ceiling: The cost structures and micromanagement differ from project to project. It’s especially tough for NGOs that focus on lobbying rather than development. In 2018-19, 1,328 non-governmental organizations (NGOs) had administrative costs that surpassed 20% of their total foreign funds.

Has the FCRA been used to target certain NGOs?

  • Until 2011, there were more than 40,000 NGOs registered under FCRA in India. That number now stands at 16,000.
  • Over the past few years, the government has faced allegations of targeting NGOs. Over the past seven years, the present government has canceled the registration of more than 16,700 NGOs. Over 10,000 of these cancellations were carried out in 2015.
  • The previous government had cracked down on NGOs following protests against the Kudankulam nuclear power project in Tamil Nadu. In 2012, the government canceled the registration of almost 4,000 NGOs — up from just four the previous year.
  • It was under the then government that Greenpeace India first came under the scanner. Also, Amnesty International, which was first granted FCRA registration in 2000, was not allowed renewal of its registration by the then government.

Importance of NGO:

  • Immediately after Independence and during the 1950s, NGOs became silent ‘social actors’ with Nehruvian ideas of development.
  • Not only at the national level, but the real impact of NGO-state association found its usefulness on the local level for education and poverty alleviation.
  • The biggest testament to their need became evident during the two Covid-19 waves in India. In 13 states and union territories, NGOs fed more people than the government.

Way forward:

  • The restrictions should not suffocate the work of legitimate non-governmental groups or organizations that strive for the common good.
  • The government must answer for its activities against NGOs in a more open manner.
  • It is critical for nonprofits to attain and maintain high levels of transparency in both their activities and their finances. NGOs must make their income and expenditures transparent to the public.
  • Separate the issue of religion spread and conversions from the issue of foreign sponsorship.
  • Adequate laws exist to protect people from being induced to convert. It cannot be chosen without considering the source of finances, whether domestic or foreign.
  • A global community’s ability to function depends on the seamless exchange of ideas and resources across national borders.
  • The government should embrace the ancient Indian ideal of Vasudhaiva Kutumbakam as the framework for its worldwide engagement and not be unfriendly to NGOs that critique the government’s activities.

Mains oriented question:

What is Foreign Contribution Regulation Act? What are its needs and what are the issues associated with it? (250 words)