New guidelines to banks on foreign act rule

Description

Context: India tightens oversight on funds received by NGOs. New guidelines to banks on Foreign Contribution (Regulation) Act rules.

The Ministry of Home Affairs (MHA) has laid down a charter for banks, which says that “donations received in Indian rupees” by non-governmental organisations (NGOs) and associations from “any foreign source even if that source is located in India at the time of such donation” should be treated as “foreign contribution”.
As per the existing rules, all banks have to report to the Central government within 48 hours, the “receipt or utilisation of any foreign contribution” by any NGO, association or person whether or not they are registered or granted prior permission under the FCRA.
The Foreign Contribution (Regulation) Act, 2010, was amended by Parliament and a new provision that makes it mandatory for all NGOs to receive foreign funds in a designated bank account at the State Bank of India’s New Delhi branch was inserted.
FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country.
All NGOs seeking foreign donations have to open a designated FCRA account at the SBI branch by March 31.
The NGOs can retain their existing FCRA account in any other bank but it will have to be mandatorily linked to the SBI branch in New Delhi.

Penal provisions

The Ministry has laid out a series of guidelines and charter to make the NGOs and the banks comply with the new provisions.
The charter for the banks said, “foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed.
Donations given in Indian rupees (INR) by any foreigner/foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contribution.
In 2019, MHA had amended FCRA rules where it said that even persons prohibited to receive foreign funds such as journalists, politicians, members of the judiciary “are allowed to accept foreign contribution from their relatives” if the amount does not exceed ₹1 lakh.
Any such transaction above ₹1 lakh will have to be informed to MHA.
MHA also said down “good practices” to be followed by NGOs in accordance with standards of global financial watchdog- Financial Action Task Force (FATF).
It asked NGOs to inform the Ministry about “suspicious activities” of any donor or recipient and “take due diligence of its employees at the time of recruitment.”

FCRA

FCRA regulates foreign donations and ensures that such contributions do not adversely affect the internal security of the country.
The Act, first enacted in 1976 was amended in the year 2010 and then 2020.