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FCRA Amendment | The real consequences of tightening rules around NGO funding

For a country which welcomes foreign direct, as well as institutional, investment, it is hypocritical to be overly suspicious of non-corporate funds

September 28, 2020 / 11:38 AM IST
Representative image

Representative image

In the early years of the Narendra Modi government, back in 2015, the Prime Minister caused a flutter when he cautioned against perceptions created by those he referred to as ‘five-star activists’. The years since have not been easy for those in the developmental sector.

On September 21, Parliament passed amendments to the Foreign Contributions (Regulation) Act, 2010 [FCRA], which governs foreign philanthropic funding into India’s Non-Governmental Organisations (NGOs). The activists who have petitioned the President to not sign the legislation into law call it a death-knell for the sector, while the government claims it brings in much-needed accountability. The truth is perhaps somewhere in between.

The changes include a 20 percent cap on the percentage of funding that can be applied towards ‘administrative expenses’ — which includes salary, travel expenditure, rent, et al; a restriction on using foreign funding to fund other organisations (even if the latter organisation is also FCRA registered), and the requirement to receive all FCRA donations only through an account specially maintained in State Bank of India, Delhi, irrespective of where the NGO is situated.

Some of these changes can be explained as the need for better monitoring: when the FCRA money was being passed on by recipients to other organisations, both of them reported the same amount as foreign contribution, leading to double counting. However, the solution to that was to have better reporting mechanisms rather than curb a practice that had societal benefits. Many smaller NGOs do not have the network or the wherewithal to attract foreign donations. They would therefore rely on contributions from larger NGOs with fund-raising capabilities. Since the final recipient was also registered and compliant with the FCRA rules, no interests were actually harmed.