Foreign Contribution (Regulation) Amendment Act, 2020 ("FCRA 2020")

By: Nikita Theresa Noronha - 16th December, 2020

Introduction

With an objective of enforcing stringent FCRA regulations and to bring more transparency, control and accountability, The Foreign Contribution (Regulation) Amendment Act 2020 has been notified by the Central Government on 29 September 2020, to amend certain provisions of the Foreign Contribution (Regulation) Act 2010.

These amendments are expected to strengthen compliance, enhance transparency and accountability in the receipt and utilisation of foreign contributions, facilitating genuine nongovernmental organisations or associations who are working for the welfare of the society.

Key changes introduced in FCRA 2020 are listed below: -

1. Prohibition on "public servant" from receiving foreign contributions

   The Foreign Contribution (Regulation) Act, prohibits certain persons to accept any foreign contribution. These include: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.

   The Amendment Act has amended and widened this section of the Act to add the category of "public servants", as defined in Section 21 of the Indian Penal Code, 1860, to the list of certain persons that are prohibited from receiving foreign contribution. This will prohibitpersons in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government, from receiving foreign contributions.

2. Prohibition on transfer/sub-grant of foreign contribution

   The Amendment Act Prohibits a person authorized to receive foreign contributions under the Act from transferring such foreign contributions to any person. Earlier, nongovernment organisations (NGOs) registered under Act were permitted to transfer the foreign contribution received by such NGO to any other registered NGO or any other unregistered person, with prior permission of the Ministry of Home Affairs (MHA).

   This provision will now restrict NGOs from acting as fundraisers and channelling funds to other NGOs, as opposed to using the same directly for the object and purpose for which they were set up and for the purposes permitted under their registration under the Act. FCRA registered NGOs will now have to innovate the ways in which they collaborate for social projects to re-align with this new restriction to ensure continued funding for the ongoing plans.

3. Lowering the cap on administrative expenses

   The Amendment Act has restricted the use of foreign contribution for administrative expenses from 50% to 20%. The amendment seems to promote utilisation of such funds towards the objective of the grant and curtail its mis-utilisation.

   Though majority of organisations may not be in favour of the same as it would lead to complexities in managing the affairs and functions in India, it is a welcome change for a number of philanthropists who do not prefer to support NGOs due to their heavy administrative expenses leaving aside less funds for the philanthropic objective.

4. Opening of bank account in State Bank of India, Delhi

   Earlier under section 17 of Act, the Foreign Contribution recipient was permitted to receive foreign contribution in an account opened in any of the scheduled banks.

   The Amendment Act substitutes section 17 of FCRA requiring the recipient of foreign contribution to receive such amount only in an account designated as "FCRA Account" opened in a branch of the State Bank of India (SBI) at New Delhi.

   However, it provides relaxation to the recipient to also open another FCRA Account in any of the scheduled banks in India for the purpose of keeping or utilising the foreign contribution which has been received from its "FCRA Account" in the branch of SBI at New Delhi.

5. Power to prohibit a foreign contribution recipient from utilising/receiving its funds

   Under the Act, if a person accepting foreign contributions is found guilty of violating any provisions of the Act, the unutilised or unreceived foreign contribution could be utilised or received, only with the prior approval of the Government.

   The Amendment Act has now added a proviso to section 11 to provide that the Government may also restrict usage of unutilised foreign contribution if, based on a summary inquiry the Government believes that such person has contravened provisions of the Act. This amendment appears to be preventive to enable the Government to preclude receipt and utilisation of foreign contributions when it finds that the recipient is prima-facie contravening the Act.

6. Identification requirements

   The Amendment Act has amended section 13 of the Act to give the Government the power to suspend the registration certificate of a person for up to 360 days instead of 180 days as per the Old Act. This will provide a tool to the Government to keep the registration certificates under suspension for almost a year when it may not have solid grounds to finally cancel the registration. Needless to say, that the power to extend the suspension will have to be exercised judiciously

7. Surrender of certificate

   The Amendment Act has added section 14A allowing the Government to permit a person to voluntarily surrender their registration certificate, if it is satisfied that such person has not contravened any provisions of the Act. Post surrender, the management of the foreign contribution and related assets will then vest with the prescribed authority.

8. Identification of all office bearers or directors or other key functionaries

   A new section has been inserted wherein any person who applies for a permission or registration/renewal under FCRA shall need to provide Aadhaar cards of all its office bearers or directors or other key functionaries. In case of foreigners, a copy of passport or overseas citizen of India card shall need to be submitted.

Conclusion

The Amendment Act hopes to ensure greater transparency and effective monitoring of the inflow of foreign funds and the utilization for the activities set out in their registration.

Though, it is a never-ending argument that whether there was a need to bring such drastic reforms in spite of the fact that foreign contributions were already under strict regulatory controls, however surely such changes will have far-reaching consequences in the fields of education, health, people’s livelihoods, gender justice and indeed democracy in India.

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