Socio Research & Reform Foundation

From today we start a series on common quries being raised by several NGOs to help better understand of resent FCRA changes

One of the queries is, if NGOs can receive funds in their present FCRA Designated Account (let’s call it ‘existing designated account’) from a foreign donor. Answer is unequivocal YES, that is the basic reason govt has allowed to open A/c by 31^st March 2021. Govt realized that it may take time to open bank a/c, and if no time slot is given, the whole Sector would come to stand still, since it would take time for thousands of NGOs to open bank account in SBI, Parliament Street.

Till the time bank account is opened, NGOs can receive funds in their existing designated account. However the day designated account is opened in SBI Parliament Street, from that day itself, no funds can be received in ‘existing designated account’. Also please note last day being 31^st March, all must open the bank account in SBI Parliament Street Branch before 31^st March 2021.

There is some confusion relating to what will happen to funds lying in the ‘existing designated account’ once SBI Parliament street account is opened. Is it to be transferred to SBI Parliament Street Branch? Answer is NO, the money lying in present account should remain there and can be ‘utilized’ from there itself. S.17(1) second para clearly states that another bank account can be opened wherever NGO wants to ‘keep or utilise’ funds. Thus money lying in your earlier designated bank account need not be transferred to SBI Parliament Street Branch. In any case money to be rec’d in SBI Parliament Street should be only ‘for the purposes of remittances of Foreign Contribution’. SBI Parliament Street Branch is not likely to accept any funds which are not coming from outside India.

Hope this clarifies a very important issue.

—
Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place,
New Delhi – 110008

SBI Parliament Street Account can be opened by 31^st Mar 2021
(based on FCRA Public Notice dt 13-10-2020)

Realising the practical problems for thousands of NGOs to open bank account, overnight in Parliament Street Branch, Govt has now given extension to open this account before 31^st March 2021.

Once again the notice reiterates, that NGO need not visit Parliament Street Branch, and can request any other Branch of SBI to facilitate. Though it may take some time for SBI branches to facilitate, but ultimately they should do it.

If in any doubt, please contact SBI Parliament Street Branch email id: agmcommercial00691@sbi.co.in .

So now anyone expecting transfer of FC funds from outside India, you may do so till the date of opening of account or 31^st March 2021, whichever is earlier.

All new applicants must open bank account directly in SBI, Parliament Street with immediate effect.

Please note that FUNDS TRANSFER TO NGOS is not covered by above notice, no Indian NGO can transfer funds to another NGO, after effective date of Amendment Act, i.e. 29^th Sept 2021.

Click for FCRA Notification

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place,
New Delhi – 110008

Govt. has shown un-characteristic rush to get FCRA implemented. It has notified the FCRA Amendment Act 2020 and made it effective from 29^th September 2020. The short Notification SO 3395(E) dt. 29^th September 2020 reads:

In exercise of the powers conferred by sub-section (2) of section 1 of the Foreign Contribution (Regulation) Amendment Act 2020, the Central Government hereby appoints the 29^th day of September 2020, as the date on which the provisions of the said Act, shall come into force.

Thus there is no doubt that the provisions of amendment Act have become effective yesterday, though how these would be implemented, NGOs have been left to fend for themselves, as there are no guidelines or amended rules on transfer of funds to partners (Rule 24 still on Rule book though can no longer be implemented), or how NGOs are supposed to open designated account with SBI New Delhi, or anyone else who has genuine difficulties or questions.

—

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Dear Friend,

Thank you for giving information about amendment of FC rules 2020.

I request you to let me know how a rural Trust in Sundarban area can get prior permission for receiving foreign grant for health services.

With best regards.

Samir Kr. Halder

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.

—

Socio Research & Reform Foundation (NGO)                       
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Govt has introduced a bill in Lok Sabha yesterday (18 Sep 2020) to postpone compulsory renewal of S.12AA & S.80G renewals to 1^st April 2021. This will be a temporary relief, Govt has initially planned it effective 1^st June 2020 and then postponed it to 1^st October due to uncertainties of pandemic. Now rather than shelving the proposal Govt has proposed to yet again postpone it to next year. All NGOs will need to apply within 3 months effective 1st April 2021.

In addition to the above, the bill also includes PM CARES Fund under S.10(23C). So all income of the Fund rec’d effective 1-4-2020 will be exempt under Section 10(23C).

—

Socio Research & Reform Foundation (NGO)                       
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Dear Members,

I have a query under Foreign Contribution (Regulation) Act, 2010.

A company whose business is to provide low cost greenhouses to small and marginal farmers has received grants from a foreign Bank. The nature of the amount received is in the form of ‘Grants’ and therefore, no consideration has been provided by the Indian Company to the Grantor.

Please clarify if the above would require the approval or prior permission under Foreign Contribution (Regulation) Act, 2010.

Appreciate your inputs in this regard.

Regards, Ranjitha

Dear Sir/Mam,
Thanks a lot for the information about USG installation.

I like to know another information. The Non FC registered Trust has no capacity to buy USG machine, but the facilities is needed in the area as there is no government facility for USG. Can the Trust give place to FC registered organisation to install the machine in Trust’s health center? Please let me know whether there is any   way to provide  USG service to rural community. Because  FC organisation has no suitable space for installation but it can help the trust by giving a machine.With best regards.

Samir Kr. Halder

Dear Members,

I would like to get expert opinion on the following case: can quote the clause if mentioned in the FCRA 2010.

Can petty cash (less than INR 5,000) be redeposited at the impressed/utilization bank account every month; the cash was withdrawn from the same bank account.

Looking forward to hearing from you,

Ajaya Paik