Published on 28 Jan 2025
NGO and FCRA Amendment
An amendment was brought in the Foreign Contribution (Regulation Act) in 2020 for better regulation of NGOs under the act. Some of its features are:
FCRA registration: All NGO that wish to receive foreign funds must apply for FCRA registration with the MHA who is required to approve or reject within 90 days.
Validity: The FCRA registration is valid for 5 years. The NGOs are expected to apply for renewal within 6 months of the date of expiry of registration.
Designated account: NGO seeking foreign funds have to open a designated account at SBI New Delhi branch.
Only banking channels allowed: Foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed.
Restrictions on the fund: Only 20% of the fund shall be used for administrative purposes. NGOs are restricted from transferring funds to another NGOs account.
Cancellation of registration: The Central government can cancel the registration in public interest. Once cancelled, it is not eligible for re-registration for three years.
Prohibition: Election candidates, media or journalists, judges, government servants, members of assembly or political party and organizations of political nature are prohibited from receiving such funds.
Concerns regarding FCRA amendment
International criticism: Many NGOs have a global network as they work against global threats like climate change. Hence, such regulations can bring international criticism.
Example: India freezing the accounts of Greenpeace organization received criticism from international forums.
Poor ranking in indices: Such restrictions can place India in poor rankings in international indices, which affects India’s soft power.
Example: India ranking 111 in Global Hunger Index and 53rd in Global Slavery Index.
Difficulty in accessing funds: NGOs in India are already short of domestic funds. FCRA tightening can strain the arrival of foreign funds, thus affecting their functioning.
Example: Since 2011, over 20000 NGOs have been stripped of their foreign funding licenses. (MHA data)
Human resource management: Allotting only 20% funds for administrative purposes can lead to understaffing and loss of job for NGO employees.
Impede social welfare: Lack of funds can hinder the social initiatives of the NGOs, which ultimately leads to poor social growth.
Example: Suspension of Amnesty International’s operation in India has halted all their human rights related programmes in India.
How to improve NGO functioning
Mother NGO scheme: An established NGO to guide and monitor the working of NGOs working under similar domains.
Supply skilled workforce: Government supported internship programmes and skilling initiatives to address the human resource shortage.
Data driven corrective measures: Punitive actions against any NGO should be based on verifiable facts so that international criticism can be reduced.
Social Stock Exchange: It would serve as a medium for enterprises to seek finance for their social initiatives, acquire visibility and provide increased transparency about fund mobilisation and utilisation.
National Accreditation Council: A National Accreditation Council consisting of academicians, activist, retired bureaucrats should be made to ensure compliance by NGOs.
Activity mapping to reduce duplication of effort: There should be better coordination between Ministries of Home Affairs and Finance in terms of monitoring and regulating illicit and unaccounted funds
Social Audit: It can help NGOs to identify areas where they can improve their operations and their impact on the community.
NGO Dharpan Portal: Registered NGOs gain access to various government grants, schemes, and funding opportunities.
Vijay Kumar Committee recommendations:
Nodal Body: Make NITI Aayog the nodal body to oversee the various interfaces between NGOs
Modernize registration procedures Under IT Act and FCRA so as to facilitate the seamless operation of NGOs, without the need for cumbersome and intrusive processes.
Reduce the need for a physical interface between NGOs and public officials acting under the IT Act and the FCRA
Separate law for voluntary agencies engaged in activities of a charitable or public good nature to enable more effective and efficient regulation of the sector.
Uniform legislative framework: Recommended an overarching legislation with best practices that would replace various State-level and existing Central laws.
Information dissemination: Details of NGOs should be available as searchable database information.
'Light regulation' of NGO so as to reduce their harassment.
Drawn up a framework of guidelines for the accreditation of NGOs, audit of their accounts, and procedures to initiate action for recovering grants in case of misappropriation.
Hence, NGOs need to be regulated to ensure that they are staying true to their objectives. But these restrictions shall not cause an impediment to the functioning of these non-profit organizations, as it will lead to disruption of public welfare.
Social Sector
Non-Governmental Organizations
Formal groups
FCRA amendment
General Studies Paper 2
Governance and Transparency
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