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

• The FCRA 2010 regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies. Foreign contribution is the donation or transfer of any currency, security or article (of beyond a specified value) by a foreign source.

• The objective is to prevent use of foreign contribution or foreign hospitality for any activity detrimental to the national interest.
• All societies, companies, associations and NGOs have to register themselves under the FCRA and fulfil definite criteria to be eligible for foreign funds. 
• 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 contributions for social, educational, religious, economic and cultural purposes. 
• Filing of annual returns, on the lines of Income Tax, is compulsory. 
• At present, there are 22,591 FCRA-registered NGOs in the country.

Who cannot receive foreign donations?

• Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution. 
• However, in 2017 the Ministry of Home Affairs (MHA), amended the FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.

Foreign Contribution (Regulation) Amendment Act, 2020

• Last year, the Parliament passed the Foreign Contribution (Regulation) Amendment Act, 2020 which amends the Foreign Contribution (Regulation) Act, 2010.  

Highlights of the 2020 Act

Prohibition to accept foreign contribution

• The amendment adds public servants (as defined under the Indian Penal Code) to the list of persons who are prohibited to accept any foreign contribution. 
• 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.

Transfer of foreign contribution

• The amendment act prohibits the transfer of grants received under FCRA to any other person or organisation.  

Aadhaar for registration

• Any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document.  
• In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.  

FCRA account

• Organisations can receive the foreign funds in a bank account designated as the ‘FCRA account’ only in branches of the State Bank of India, New Delhi, as notified by the central government.   

Reduction in use of foreign contribution for administrative purposes

• Under the 2010 Act, a person who receives foreign contribution must use it only for the purpose for which the contribution is received. Further, they must not use more than 50% of the contribution for meeting administrative expenses.  
• The amendment act reduces this limit to 20%.

Suspension of registration

• Under the 2010 Act, the government may suspend the registration of a person for a period not exceeding 180 days.  
• The latest amendment adds that such suspension may be extended up to an additional 180 days.

Why in News?

• According to a submission made by a non-governmental organisation in the Delhi High Court, 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 1.
• An Assam-based NGO has also moved the Gauhati High Court against another amended provision of the Foreign Contribution (Regulation) Act 2020 that makes Aadhaar mandatory for opening and operating the account in Delhi.
• The Gauhati High Court has 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.

Reference:

1. https://www.thehindu.com/news/national/most-ngos-dont-have-sbi-account/article34545936.ece