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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Socio Research & Reform Foundation (NGO)
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