Foreign Contribution (Regulation) Amendment Rules, 2023

The Ministry of Home Affairs (MHA) has issued a gazetted notification, amending the Foreign Contribution Regulation Act (FCRA) rules after mandating NGOs with FCRA licence to submit details of movable and immovable assets created out of foreign contributions.

• FCRA was enacted during the Emergency in 1976 amid apprehensions that foreign powers were interfering in India’s affairs by pumping money into the country through independent organisations.
• In 2022, the MHA amended foreign funding rules giving certain relaxations such as;
  • Allowing relatives to send more money under the FCRA and
  • Giving more time to the organisations to inform government about opening of bank accounts for utilisation of funds received under ‘registration’ or ‘prior permission’

About the Amendment:

• Under the new rules, political parties, legislature members, election candidates, judges, government servants, journalists and media houses among others – all barred from receiving foreign contribution – will no longer be prosecuted if they receive foreign contribution from relatives abroad and fail to intimate the government within 90 days.

How foreign funding is being regulated in India?

• The FCRA registration is a mandatory requirement for receiving foreign funds.
• The License is granted by the Union home ministry grants FCRA licenses for a five-year period.
• FCRA registration is valid for5 years, and NGOs are expected to apply for renewal within six months of the date of expiry of registration.
• The government can also cancel the FCRA registration of any NGO if it finds that the NGO is in violation of the Act, if it has not been engaged in any reasonable activity in its chosen field for the benefit of society for two consecutive years, or if it has become defunct.
• Once the registration of an NGO is cancelled, it is not eligible for re-registration for three years.

Criteria to seek FCRA registration:

• The FCRA requires every person or NGO seeking to receive foreign donations to be:
  • registered under the Act
  • to open a bank account for the receipt of the foreign funds in State Bank of India, Delhi
  • to utilize those funds only for the purpose for which they have been received and as stipulated in the Act
• FCRA registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programmes.
• Exceptions:
  • Under the FCRA, the applicant should not be fictitious and should not have been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another.
  • The applicant should also not have been prosecuted for or convicted of creating communal tension or disharmony.
  • Also, should not be engaged or likely to be engaged in the propagation of sedition.
  • The Act prohibits the receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.

Why Foreign Contributions are regulated?

• National Security: Foreign funding can be misused to support activities that may undermine the security and stability of a country.
  • Governments want to prevent foreign entities from influencing domestic affairs in ways that could be detrimental to their interests.
• Sovereignty and Independence: Excessive foreign influence can compromise a country's ability to make decisions that are in its best interest.
  • Governments aim to maintain control over their own policies and actions without undue external pressure.
• Transparency and Accountability: By monitoring and overseeing foreign contributions, governments can track how the money is used and ensure that it is not misappropriated or channeled into illegal or illicit activities.
• Preventing Money Laundering and Terrorism Financing: Regulations help in detecting and preventing these illegal activities by imposing strict reporting requirements and due diligence measures on organizations receiving foreign funds.
• Protection of Domestic Interests: Regulations are often put in place to protect domestic organizations and industries from unfair competition or manipulation by foreign entities.
• Political Independence: Rules are designed to ensure that domestic political activities are free from undue foreign influence, thereby preserving the integrity of democratic processes.
• Preventing Subversion of Values: Foreign contributions may come with strings attached, where the donor seeks to promote specific ideologies or values.
• Compliance with International Obligations: Some countries have international obligations to regulate foreign contributions as part of their commitments to global anti-money laundering, anti-corruption, and counter-terrorism financing efforts.