Daily News Analysis

Foreign Contribution Regulating Act

1st January, 2022 Polity

Figure 1: No Copyright Infringement Intended


  • The rejection of the application for renewal of the Foreign Contribution (Regulation) Act registration of Missionaries of Charityby the Ministry of Home Affairs (MHA) on grounds of not meeting eligibility conditions has brought to light the issue of regulation of Non-Governmental Organizations (NGO) under the FCRA.


About FCRA :

  • The Foreign Contribution (Regulation) Act regulates the receipt of foreign contribution or aid from outside India for use in the country.
  • This is essential to ensure that such aid does not effect political or any other situation in India.
  • For genuine donation, the provision of law is not very difficult to comply.
  • The compliance is limited to filing annual return every year.
  • This law is enforced by the Ministry of Home Affairs.
  • There is a separate section in the MHA to ensure compliance to the Foreign Funding Registration.


Amended Provisions:


Amended Provisions

Prohibition to accept Foreign Contribution

The amended act adds public servants (as defined under the Indian Penal Code) to this list. 


Transfer of foreign contribution

The amended Act amends this to prohibit the transfer of foreign contribution to any other person. 

Aadhaar for registration

The amendment adds that 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. 

FCRA account

The Act amends this to state that foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the central government. 

No funds other than the foreign contribution should be received or deposited in this account.


Restriction in the utilisation of foreign contribution

The amendment adds that the government may also restrict usage of unutilised foreign contribution for persons who have been granted prior permission to receive such contribution. 

Renewal of license

 The Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application: (i) is not fictitious or benami, (ii) has not been prosecuted or convicted for creating communal tension or indulging in activities aimed at religious conversion, and (iii) has not been found guilty of diversion or misutilisation of funds, among others conditions.

Reduction in use of foreign contribution for administrative purposes

The amendment reduces this limit to 20%.

Powers under the Act:

  • The Act empowers the Ministry of Home Affairs to suspend the licence of any entity not following the regulations set forth under the FCRA.
  • The MHA on inspection of accounts and upon receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for a period of 180 days.
  • When the FCRA registration is suspended, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount in the bank account without prior permission from the MHA.
  • The MHA can also cancel the registration of an organisation which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.


Role of Civil Society in Development:

Bridging The Gap: 

  • NGOs endeavour to plug gaps in the government’s programmes and reach out to sections of people often left untouched by state projects. For example, providing aid to migrant workers in Covid-19 crisis.
  • Also, they are engaged in diverse activities, relating to human and labour rights, gender issues, healthcare, environment, education, legal aid, and even research.

Role of an Enabler: 

  • Community-level outfits and self-help groupsare critical for bringing any change in the ground.
  • In the past, such grass roots organisations have been enabled by collaborations with bigger NGOs and research agencies that have access to foreign funding.

Acting as a Pressure Group: 

  • There are political NGOs that mobilise public opinion against government’s policies and actions.
  • To the extent such NGOs are able to educate the public and put pressure on public policy, they act as importantpressure groups in a democracy.
  • They also mobilize and organize the poor to demand quality service and impose a community system to accountability on the performance of grassroots government functionaries.

Role in Participative Governance: 

  • Many civil society initiatives have contributed to some of the path-breaking laws in the country, including the Environmental Protection Act-1986, Right to Education Act-2009Forests Rights Act-2006and Right to Information Act-2005.

Acting as a Social Mediator: 

  • The social inter-mediation is an intervention of different levels of society by various agents to change social and behavioural attitudes within the prevailing social environment for achieving desired results of change in society.
  • In Indian context wherein people are still steeped in superstition, faith, belief and custom, NGOs act as catalysts and create awareness among people.



Challenges associated with FCRA

  • Ambiguity in the act: Issues lies with ambiguity in words such as Public interest or economic
  • Detrimental for Small NGO: Recent amendment would restrict those small NGOs that are unable to get registered yet require funds.
  • Biasness in Government Functioning: By allowing only some political groups to receive foreign donations and disallowing some others, can induce biases in favor of the government.
  • No Proper Explanation: Many NGOs have been de-registered by the security agencies on public interest without clear explanation.
  • Delay in funding: It would also cause delayed functioning to those subsidiary NGOs which are dependent on other Large NGOs for funds.
  • Affect People Rights:  The FCRA restrictions have serious consequences on both the rights to free speech and freedom of association under Articles 19(1)(a) and 19(1)(c) enshrined in the Constitution.
  • Affected functioning of Civil Societies: Without the registration under FCRA, no NGO can receive funds over rupees 25000 at one time. This has restricted smooth functioning of many NGOs.


Way Forward:

  • the regulations should not stifle the functioning of genuine non-governmental organizations or associations, who are working for the welfare of society.
  • The Government must give a more transparent account of its actions against NGOs.
  • It is important for NGOs to achieve and maintain a high degree of transparency in not just their work but also their financials. NGOs need to keep their income and expenditure open to public scrutiny.