Govt has introduced amendments in FCRA through FCRA 2020, which are likely to have a major impact on the way the NGO Sector works. Major changes with brief description is as follows:
- No transfer of FC to Public Servant: Addition of ‘Public servant’ as defined under Indian Penal Code to list of persons prohibited (S.3 ) from receiving Foreign Contribution. A Public servant as defined under IPC has very wide coverage. It covers not only Govt servants from central govt, but also all officers of court, govt servants working with any govt including state govts, municipalities, local bodies, etc.
- No transfer of funds to NGOs : Section 7 which authorizes NGOs to transfer funds to other NGOs have now been amended, and no NGO can transfer funds received to any other person under FCRA. This is a major change. This would mean most small NGOs registered in rural area or even urban area will not be able to accept funds under FCRA, unless received from outside India. As we know most mid size / large NGOs who receive funds under FCRA further transfer to smaller NGOs, who have better reach. This could impact NGO working as we understand at present.
- Administrative Exps. Limited to 20% : We all know problem is not of admin exps, (no NGO has 50% admin exps), it is of definition of admin exps. Again if rules are not made more flexible, this may cause issues, but most NGOs will try to treat salaries etc. as programme expenses, and avoid 20% problem. How government responds needs to be seen.
- Restriction on use of FC funds, where Govt is making enquiry: Earlier a person had to be found guilty (i.e. convicted in the court), now Govt on the basis of any information and conducting a summary enquiry in the Dept. may decide that such person will not utilize the funds.
The above while legally is a major change, but on practical grounds, once FCRA Dept instructed banker to freeze the funds, NGO could not use it in any case. No major impact likely immediately, accept for persons fighting the cases in the court.
- Adhar for all board members: For all Indian Board members, now Adhar is compulsory. In case of foreign Board members, provide OCI card for Indian origin persons or foreign passport.
This could again lead to exodus of Board members from NGOs, as many may not be comfortable providing Adhar to Govt, where no benefit.
Earlier when Darpan was made mandatory, some NGOs had taken the matter to court and FCRA had than made Darpan optional. NGOs should try seeking relief from court, particularly NGOs who do not receive any / significant funds from Govt.
- Surrender of FCRA made legal, but with major restrictions: Earlier, option of surrendering FCRA was not included in FCRA Act, now it has been, after most famously Infosys Foundation surrendered it. However now Govt has specified that in case of surrender, all assets created out of FC funds, would need to be vested in authority as Govt decides. – Generally a Govt official.
Again this is an issue which needs to be challenged in court, since this involves transfer of assets to Govt, without any conviction of the NGO under any provision of the Act.
- Inspection of all Trustees/Board members/ Chief Functionary: It was being stated for long, that there would be inspection of all office bearers, before renewal. Now the necessary amendment has been made.
No idea how Dept will manage, renewals, which it is supposed to give at least 6 months before expiry. Issue will spiral into a huge problem, when renewal comes.
- FCRA Account now to be opened at SBI New Delhi: All registered agencies to have a bank account with SBI, New Delhi or a designated branch. This is to have a total control over receipt of funds under FCRA. An NGO can also transfer funds to another FCRA a/c, which can be opened anywhere as per its convenience.
This new provision likely to cause huge issues for small NGOs outside Delhi, but should be manageable, though there will be delays, as SBI is not known for efficient customer service.
Overall, the new provisions will make fundamental changes in the way NGOs work, more and more will rely on local funds. Problem will be with large Indian entities of foreign NGOs, who generally work with large number of small / medium NGOs. They should lobby with the Govt not to notify changes under S.7 or at least challenge these changes in the court.
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अब FCRA में इतने नियम विधान है की सोचने में आता है
और आधी चीज समझ में नहीं आता हिन्दी भाषियों को. सब जगह भ्रम की परिस्थिति बनी हुयी है
No transfer of funds to NGOs : In the existing norms of FCRA, one NGO (mainly for INGOs registered in India) gets FC money as 1st or 2nd recipient, then signed MoU with other local NGO (registered under FCRA Act) and get funds as project grant from 1st or 2nd recipient (either from INGOs or other Big NGO (working as a nodal agency for a network of local CSOs / NGOs and have common program for implementation at grassroots level) as 2nd recipient. What do you say about the proposed amendments for transferring funds in the form of project grant 1st recipient to 2nd or 3rd recipient?
As per proposed amendment, this is not possible now. As an NGO can either receive funds directly from a foreign source (i.e. a foreign entity registered outside India) or not at all. No entity registered in India, and who has a FCRA no. can further transfer funds to another NGO.
The Foreign Contribution (Regulation) Amendment Bill 2020
There is a huge discontentment after the Bill was passed by the #indiangovernment in the #Parliament without even seeking an opinion from the non profit community..
Commonly seen concerns –
– #inefficiency in funds management due to routing the funds through #SBI only
– risk of #breach of #privacy due to #aadhaar sharing
– restriction on sub granting to NGOs (while sub-contracting through a regular or a cost reimbursement agreement can always be an option worth exercising)
– Cap on #administrative costs reduced from 50% to 20%, while all the #NGOs were already charging program admin costs to programs only
– No provision to surrender the #FCRA (in a way it’s making the law more stringent and any offender will not be spared)
One major point that not many of us would have noticed is ever expanding role of the #socialenterprise in India. The numbers have exorbitantly increased in last 3-5 years and I mentioned it earlier also that the transition from NGO’s to the Social Enterprises had already begun.
While it could be a fear factor for NGO operators but the #startups have their own merits (#technology driven systems) and bringing in #FDI in #india . For the GoI, it’s about making a better choice.
Let’s be exit ready!
Hello Rajesh ji,
You raise an important issue of social enterprise. Request you to put a small note which we will share with our SRRF Dialogue members. I think this will be very helpful in spreading awareness about options available to the sector.
warm rgds
Sir,
Can you please explain the difference between Social Enterprises and NGOs. Is it necessary to register the Social Enterprises under companies Act? Is it necessary to obtain FCRA and section 12AA registration for these Social Enterprises?
It’s beginning of a transition phase from NGOs to the Startups, the Social Enterprises which are backed by the BIG Corporate businesses. For years they have been establishing direct implementation models that do not require grass root NGO support, look at Haqdarshak, Medtronic Labs, Frontier Markets etc. They enjoy the tax Holidays and bring in Foreign Direct Investment also (which is one of the major inspiration for the GoI)
Read this for more details – https://idronline.org/social-enterprise-is-eroding-civil-society/
It was expected a year ago but somehow got delayed due to CORONA kick.
Let’s start preparing an Exit Plan in a few years from now.
The Policy would not serve the public good, therefore, it is required to be challenged by forming an association of NGOs in the supreme court of india or Delhi High Court.
Most of the ngo meant for charitable service to the society. These ngo’s are found efficient and effective during the emergency situations. However, Govt. should simplify the rules and guidelines of FCRA for the ngos.
I advise,stop using NGO when you refer such charitable/voluntary organisation,now start a new name’VOs/CSOsCharity & social Development organisation
How these propose changes are going to affect Branch Offices of the international organizations started with the permission of RBI.
It depends, have you taken FCRA permission / registration for BO. If yes, then it will impact a BO also in same was, since proposed changes are applicable to all those, who have rec’d FCRA permission / registration. In case BO approval is limited to salary & office exps. of BO, and no FCRA permission / registration was required, then you are not impacted and continue to function as earlier.