Impact of New FCRA Rules on Relief Work of NGOs – Explained, Pointwise


The second wave of Pandemic has struck the country very hard. There has been an enormous rise in Covid-19 cases reaching around 4 lakh/day. This necessitates active participation from all the stakeholders including NGOs. However, NGOs are not able to contribute much due to the stringent conditions imposed on them by the Foreign Contribution Regulation (Amendment) Act 2020 and Foreign Contribution Regulation (Amendment) Rules 2020.

There are a lot of donors who are willing to send money/Covid-19 related equipment like ventilators, oxygen cylinders, etc. via NGOs and hospitals. However, the new rules are acting as a big hurdle to them. Christian Educational Society (NGO) has even filed a petition in the High court. It has demanded relaxation against the mandatory opening of an FCRA account at SBI, New Delhi branch. In this article, we will focus on the concerning rules and provide some suggestions for improving the present situation.

Foreign Contribution (Regulation) Act:
  • It is an act of Parliament enacted in 1976 and amended in 2010. It was to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.
  • Coverage: It is applicable to all associations, groups, and NGOs which intend to receive foreign donations.
  • Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years. Further, it can be renewed subsequently if they comply with all norms.
  • Registered NGOs can receive foreign contributions for five purposes — social, educational, religious, economic, and cultural. There are 22,591 FCRA registered NGOs.
Foreign Contribution Regulation (Amendment), Act 2020:
  • Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered for that purpose.
    • The amendment also forbids sub-granting by NGOs to smaller NGOs who work at the grassroots.
  • FCRA account: The act states that foreign contributions must be received only in an FCRA account opened in the State Bank of India, New Delhi Branch. No funds other than the foreign contribution should be received or deposited in this account.
  • Regulation: The Act states that a person may accept foreign contributions if 
    • They have obtained a certificate of registration from the central government or 
    • They have taken prior permission from the government to accept foreign contributions. 
  • Aadhar usage: The act makes it compulsory for all trustees to register their Aadhaar card with the FCRA account.
    • The Act also makes Aadhaar a mandatory identification document. It is for all the office bearers, directors, and other key functionaries of an NGO.
  • Restriction in utilisation of foreign contribution: The act gives government powers to stop utilization of foreign funds by an organization through a “summary enquiry”.
  • Reduction in use of foreign contribution for administrative purposes: The act decreases administrative expenses through foreign funds by an organization to 20% from 50% earlier.
    • Administrative expenses include salary, office rental, furnishing, stationery, communication, and transport.
  • Surrender of certificate: The act allows the central government to permit a person to surrender their registration certificate.
 Foreign Contribution Regulation (Amendment) Rules 2020:
  • New rules require any organization that wants to register itself under the FCRA to have existed for at least three years. Further, it should have spent a minimum of Rs. 15 lakh on its core activities during the last three financial years for the benefit of society.
  • Office bearers of the NGOs seeking registration under the Foreign Contribution (Regulation) Act must submit a specific commitment letter from the donor. It should indicate the amount of foreign contribution and the purpose for which it is proposed to be given.
  • Any NGO or person making an application for obtaining prior permission to receive foreign funds shall have an FCRA Account.
Current Scenario:
  • Christian Educational Society (NGO) has filed a plea in Delhi High Court. 
  • It demands an extension of 6 months for the opening of an FCRA account with State Bank of India, New Delhi Branch. 
  • Further, it desires to set aside the restriction on receiving foreign contributions in existing FCRA accounts for 6 months from 1 April 2021.
  • Both the requests are made aimed to smoothen its economic, educational, and social activities.
  • Similarly, on May 3, the government permitted imports without GST levies for pandemic relief material donated from abroad for free distribution in the country. However, no FCRA exemption was granted for this purpose. 
Issues in implementing the amended rules during the pandemic:
  1. First, there are considerable administrative delays in the functioning of banks and ministries. 
    • For instance, the Christian Educational Society (NGO) had applied to open the account at the SBI Delhi branch before the March 31 deadline. However, the administrative delays prevented the opening. It, later on, filed a petition for a 6-month relaxation.
    • Similarly, in some cases, the Ministry failed to authorize a form sent by the SBI. It, thereby, prevented the eligible NGOs from receiving foreign funds.
  2. Second, NGOs are also facing severe inconvenience in submitting the necessary papers and personal documents of trustees and other members. This inconvenience is created as members live at different locations and various regions are under a lockdown.
    • Due to this, NGOs are not able to receive foreign contribution in their existing non-SBI FCRA account nor are they able to open a primary FCRA account with SBI to receive foreign contribution.
  3. Third, the government has adopted a suspicious stance towards NGOs. They perceive them to be rule breakers by default and take strict action against them. This has resulted in the cancellation of FCRA registration of around 16500 NGOs since 2014.
  4. Fourth, the new rules pay disregard to the successful NGO partnership model across the world. Under this, the focus is placed on establishing a synergy between urban and hinterland regions. 
    • Urban professionals are better trained to raise funds, lobby with the government for policy changes, grants, etc. On the other hand, field workers are better acquainted with ground conditions, people, and their culture and issues at the local level. 
Impact of stricter rules:
  1. Firstly, the NGOs are spending more time doing paperwork than on the ground. This has reduced the ambit of development works carried on by them.
    • Covid 19 relief work, Community work involving awareness building, legal and constitutional literacy, participatory research, etc. have been hit by the new rules.
  2. Secondly, Indian entities (including hospitals and charitable trusts) can’t receive COVID-19 relief material from foreign donors. Unless they are registered under the Foreign Contribution Regulation Act (FCRA) with a stated objective involving the provision of medical care.
    • This has jeopardized some large donors’ plans to buy equipment like oxygen plants and concentrators for Indian hospitals and smaller charities.
  3. Thirdly, the new rules have enhanced compliance formalities which have made it very difficult to run an NGO. This has resulted in the closure of many NGOs and the livelihood loss of people working in them.
    • For instance, the capping of administrative expenditure at 20% has made them unviable. This is especially true for NGOs hiring professionals like lawyers and doctors who charge hefty fees for their services.
  4. Fourthly, the new rules have made ‘sub granting illegal. Due to this, big NGOs based in Delhi or Mumbai are not able to subgrant their foreign funds to implement programs via partner organizations in districts and villages.
  • The government should issue a clarification on exempting the receiver/importer of Covid related material from complying with the FCRA provisions.
  • The Delhi high court should give a quick decision over the request for a 6-month extension on the 31st March 2021 deadline for opening an FCRA account at SBI, New Delhi.
  • The government should adopt a liberal stance towards the NGOs. They must be allowed grace periods to file papers or other documents rather than outrightly canceling their registration for non-compliance.
  • Further, the state governments should set up an NGO coordination center at the local level as recommended by National Disaster Management Authority (NDMA).

Civil society supplements government works and works at the grass-roots level. They should be given due freedom and autonomy to support the needs of communities and provide relief during the COVID-19 pandemic.

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