Explained: What it means for NGOs that lost their FCRA registration

Over the New Year weekend, 5,933 organisations lost their registration under the Foreign Contribution (Regulation) Act, 2010, a law that allowed them to receive and use overseas funding for their activities.

It was a major setback for a host of charitable organisations including Oxfam India, Jamia Milia Islamia, and Mother Teresa’s Missionaries of Charity.

Does this mean that the 5,933 organisations will shut down completely? No. The organisations can continue with funding raised domestically, but their functioning could shrink in the absence of an FCRA licence.

Why is FCRA registration necessary?

The Foreign Contribution (Regulation) Act of 2010, which repealed an earlier legislation, regulates foreign funding received by Indian entities and imposes checks and restrictions to govern and track inflows. For this purpose, entities seeking to receive and utilise funds from overseas must be registered.

The act bars a certain class of individuals and organisations from raising and using foreign funds including public servants, newspaper editors and publishers, election candidates and judges. The reason is to protect national and internal security from foreign intervention or disturbances.

The mechanism of registering with the government and securing a licence to receive foreign funding facilitated on-ground work by thousands of charitable organisations and NGOs, many of which will now no longer be able to receive such contributions because the Ministry of Home Affairs refused to renew their licences.

What happens if renewal of registration is refused?

The immediate impact is that such organisations will not be able to receive foreign donations and neither will they be able to use funds already received from overseas donors. All existing and future scope of utilising foreign funding stands frozen in the absence of an operational licence.

This was why the Missionaries of Charity – set up by Mother Teresa – said on December 27 that it had asked its centres not to operate any of the FC accounts until the matter is resolved.

Once approved, the registration under FCRA is valid for five years. All registration holders are required to apply for renewal at least six months before their licence lapses.

After the 2020 amendment to the act, the level of scrutiny while renewing registration was set at the same benchmark as was the case for fresh applications. The processes involved for both fresh applications and renewal applications are rather lengthy and time-consuming.

The changes made to this law in 2020 were rather stringent and were seen as throttling for the functioning of NGOs. The government claimed they were necessary to safeguard national integrity against foreign interference and prevent misutilisation of funds.

With the government refusing to renew certain registrations and no process provided to appeal, organisations are left with little choice other than to apply afresh for registration or seek revision of the refusal.

What does the law say on refusal for renewing registration?

Surprisingly, not much.

The law provides for cancellation of registration if rules and guidelines are violated and for voluntary surrender of registration. It is silent on refusal to renew registrations.

When an organisation no longer has a licence under the FCRA either because of cancellation or surrender, an authority designated by the government can take over the funds it collected and its assets. The authority can then carry out the activities of the organisation or utilise these funds and dispose of the assets.

However, the funds and assets taken over by the authority should be returned to the organisation once a valid registration is secured again.

What happens to entities that have made renewal applications and have been refused remains in uncharted territory.

How did so many registrations lapse at once?

According to reports, the government said that of the 5,933 organisations whose registration was deemed to have ceased, 5,789 – about 98 percent – were on account of non-application for renewal. This follows the 2020 amendment, which was criticised by development sector entities and the opposition.

The amendment introduced provisions for requirement of Aadhaar credentials for those applying for registrations, cut down the permissible limit for foreign fund utility towards administrative functioning to 20 percent from 50 percent earlier, barred organisations receiving funds from transferring or disbursing them to related entities, and made it mandatory for all incoming funds to be received only through a designated bank’s branch in New Delhi.

These changes were viewed as steps that would make it impossible for NGOs to function.

After the amendment was brought into force, the government granted extension of registration on three accounts owing to pendency in processing applications. The last extension was up to December 31, 2021, before which organisations were required to apply for renewals. For a small fraction of organisations that applied for renewal in due course, the government has granted a further extension till March end.

While the government’s rationale for these amendments was to keep misutilisation of funds under check, the practical difficulties in functioning faced by NGOs due to these amendments could very well be reflected in the number of organisations opting out of seeking a renewal of their registration.