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Foreign Contribution (Regulation) Amendment Bill, 2020 : What You Need to Know

Updated: Apr 17

While the Foreign Contribution (Regulation) Amendment Bill, 2020 awaits the assent of the President of India, we summarize the key terms of the Bill.

The Bill proposes to amend the Foreign Contribution (Regulation) Act, 2010 (“FCRA”) and primarily:

a. Restricts acceptance of foreign contribution by public servants and the transfer of foreign contribution by a registered person to another person;

b. Reduces the pre-approved administrative expense limit from 50% to 20%;

c. Empowers the government to hold summary trial and restrict the expenditure and receipt of remainder contributions;

d. Mandates (at the discretion of the government) submission of Aadhar identification for office bearers, directors and key functionaries, and where such office bearers are foreigners, the submission of the passport or the overseas citizen of India card identification;

e. Increasing the timeline for which the registration can be placed in suspension by an additional period of 180 days;

f. Enables surrender of registration certificate; and

g. Mandates the receipt of foreign contribution in a special FCRA Account.

FCRA was originally enacted to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals or associations or companies with an objective to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activity that is detrimental to national interest, and the proposed amendments have been introduced to strengthen the compliance mechanism, enhance transparency and ensure accountability from the receipt and utilization of foreign contribution.

Key Amendments

1. Prohibition to accept foreign contribution:

Earlier judge, government servant or employee of any corporation or any other body controlled or owned by the government were prohibited from accepting any foreign contribution.

The Bill proposes to add ‘public servants’ (as defined under the Indian Penal Code) to this list. Public servant includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.

2. Restriction on transfer of foreign contribution:

Currently foreign contribution cannot be transferred to any person unless they are registered under the FCRA or has obtained prior government approval to obtain foreign contribution.

The Bill proposes to restrict transfer of foreign contribution to any other person. This means even if the transferee is registered under the FCRA itself, still it cannot receive foreign contribution by way of transfer from another registered person.

This will restrict entities from making sub-grants and shall be detrimental for entities working collaboratively with multiple other entities on common projects.

3. Reduction in use of foreign contribution for administrative purposes:

A person receiving foreign contribution shall utilize the same only for the purpose for which the contribution is received. However the FCRA allows use of 50% of such contribution, received in a financial year, to meet administrative expenses.

The Bill proposes to reduce this limit down to 20%. This may affect the administrative functioning of many organization and may adversely affect the salaries and professional fees of multiple persons associated with such organization.

4. Power to freeze FCRA Bank account:

The Bill empowers the government to freeze the FCRA Bank account and direct the person to not utilise the unutilized foreign contribution or receive the any remaining portion of foreign contribution.

The same shall be done on the basis of a summary inquiry conducted by the government and where there is a reason to believe that the person who has been granted prior permission has contravened any of the provisions of the FCRA.

5. Aadhaar or copy of passport and OCI card for registration:

For better regulation and authenticity the Bill proposes to provide identification documents while applying for registration or applying for obtaining prior approval for receipt of foreign contribution.

The identification document shall be Aadhaar number of the applicant’s office bearers or directors or other key functionaries, by whatever name called, issued under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, or a copy of the passport or overseas citizen of India card, in case of a foreigner.

6. Suspension of registration:

The government had the authority to suspend the certificate issued to any person, for any contravention of the provision of the FCRA, for a period not exceeding 180 days.

The Bill proposes to empower the government to suspend certificate granted issued under the FCRA for a further period not exceeding 180 days.

7. Voluntary surrender of certificate:

The Bill proposes to add a provision for voluntary surrender of certificate granted under the FCRA, provided the government is satisfied that such person has complied with all the provisions of the FCRA.

However the negative side to this additional option provided is that the person surrendering the certificate shall also have to surrender all the assets created out of foreign contributions to the competent government authority.

8. Inquiry before renewal of license:

Earlier for renewal of certificate under the FCRA the applicant needed to just ensure that he is compliant with all the provisions of the FCRA and there was no additional level of scrutiny done before the grant of renewal.

Now the Bill proposes to empower the government to make inquiry, if it deems fit, before renewal of the certificate to satisfy itself that such person has fulfilled all conditions specified under Section 12(4) of the FCRA.

9. FCRA Bank Account:

A registered person must accept foreign contribution only in a single branch of a scheduled bank specified by them. However, they may open more accounts in other banks for utilisation of the contribution.

The Bill has proposed that now the foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the central government.

No funds other than the foreign contribution should be received or deposited in this account.

The person may open another FCRA account in any scheduled bank of their choice for keeping or utilizing the received contribution.

Reasons for Amendment

In the “Statement of Objects and Reasons”, the Ministry of Home Affairs has clarified their rationale behind introduction of such stringent amendments to the provisions of the FCRA.

The government has stated that foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilized the same for the purpose for which they were registered or granted prior permission under the FCRA.

Over the years the government has been forced to cancel multiple registration under the FCRA for the reasons of non-compliance and contravention of multiple provisions of the FCRA.

Therefore with a view to streamline the provisions of the FCRA by strengthening the compliance mechanism, enhancing transparency and accountability in the receipt and utilization of foreign contribution and facilitating the work of genuine non-governmental organizations or associations who are working for the welfare of the society these amendments are proposed.

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