Dear Members,
Good Morning
I have a query that if any NGO who received Foreign dontion from their foreign donor to their FCRA account (XYZ bank). With that donation they prepared fixed deposits. But now they want to utilize that fixed deposit. But bank manager told that they cannot credit the fixed deposit which is made out of foreign donation.
My question is that now that NGO wants to credit that FD in the same bank (XYZ bank). Is it possible to credit that FD in the same XYZ bank or they have to open separate account to utilize that fixed deposit donation.
Please reply to my email.
Thanks and Regards,
Anitha
You need not open a separate bank account for this purpose. You have to provide evidence to the bank that the FD was made out of FC funds account and request them to credit this amount to FC account. Then bank request its foreign currency department to allow the credit.
Vidya Sagar
SKG Sangha
Don’t understand bank’s rationale. If FDs were from FCRA Account then funds should go back to same account.
Regards,
Anup Khosla
Yes Anitha, every NGO is entitled to encash its FDs, as and when it needs them, as long as the amount is being credited back to the FCRA Designated account.
Amount invested out of Fcra cash should come back to fcra designated bank account.Even we had the problem with the Bank. Bank refused to credit the amount but later it was rectified. Some of the Banks are not aware of the Fcra rules and regulations. Banks needs to be educated if fcra rules and regulations which would solve the problem of NGO and it will also help the Bank to sort out the issues much faster.
Interest earned on FD out of FC SHOUULD BE TREATED AS FC.
IS IT NOT!
Yes, as per definition of Foreign Contribution (S. 2(1)(h) Explanation 2), interest accrued on FCRA funds is Foreign Contribution and needs to be disclosed as Foreign Contribution in the Annual Return.
FD OUT OF FC CAN BE RECREDITED INTO FCRA ACCOUNT OR CREDITED INTO PROJECT SPECIFIC FIELD ACCOUNT(FC) AND CAN BE UTILISED AS PER RULES.
IS IT NOT!
Yes.
Fixed Deposit is the current asset of the organization. When it is withdrawn or cancelled the interest and principal amount allowed to be credited into the same FC bank account. Kindly show the Charter for Banks which is available on FCRA’s website at the following link.
https://fcraonline.nic.in/home/PDF_Doc/Charter_for_Banks.pdf
Ref Clarificatory Note for Guidance point number (iv) on page 2 of this Charter.
Hope this will resolve and the banker would allow it.
Prasanna Kumar
Thanks, Prasanna Kumar. This is very useful.
The Bank Manager cannot refuse to credit the proceeds from the FD into the NGO’s designated primary FCRA bank account. This assuming that the original FCRA donations were received in the designated primary FCRA bank account and then made into an FD directly from there.
However, we all know that banks refuse a lot of valid FCRA transactions either due to lack of understanding of the law or due to systemic limitations.
One cannot open a new bank account and transfer the money to it since that will be routing of FCRA money to Domestic accounts. Even if the new bank account was designated as a utilization bank account, still transfer between secondary accounts is disallowed.
Under the circumstances, a way out could be to designate the FD as a FCRA utilization bank account and then the bank manager will not be in a position to refuse the transfer between two FCRA accounts. I am cognizant of the fact that you would have missed the 15 day deadline for informing MHA of opening a FCRA utilization bank account. But the last time I checked, Form 6 does not ask you to fill the date on which the account was opened. Thus you may not face any problem.
The FD should be made from the main FCRA receipt bank account and also credited to the same bank account.
Yes why not.
Bank cannot refuse the proceeds of FD to be credited back into FCRA account if it is made from the same account. I understand our banks have not much knowledge of FCRA rules because sometimes we also face the problems like closing of unit Sub FCRA bank account and the balance lying in the Unit bank account is not credited back into designated FCRA account, from where Imprest is transferred for their activities.
Bank has no reason to say NO to crediting FD maturity proceeds to FCRA Account when FD was created using funds from the primary FCRA Account and payment instruction for maturity proceeds mentions the said account details.