Syllabus: GS2/ Governance
Context
- Amid concerns raised by minority institutions against the Foreign Contribution (Regulation) Amendment Bill, 2026 (FCRA), the government said that the designated authority would retain the religious character of places of worship in all cases.
Foreign Contribution Regulation Act (FCRA), 2010
- FCRA aims to regulate the acceptance and utilization of foreign contributions to prohibit activities detrimental to the national interest.
- First enacted in 1976, replaced in 2010, and further amended in 2016, 2018, and 2020.
- It is administered by the Ministry of Home Affairs (MHA).
- FCRA registration is valid for 5 years and must be renewed before expiry.
- Around 16,000 NGOs are registered under FCRA, receiving nearly ₹22,000 crore annually.
Provision of Designated Authority for Asset Management
- The Bill proposes the creation of a Designated Authority as the core institutional mechanism for managing foreign-funded assets.
- The authority will take control of foreign contributions and assets when an organisation’s registration is cancelled, surrendered, expired, or not renewed.
- This authority will have the powers of a civil court and can order the transfer or sale of assets owned by NGOs to either the government or any other body.
Constitutional Provisions
- Freedom of religion: Any state action affecting religious institutions must satisfy tests of legality, necessity, and proportionality.
- Article 25: Freedom of conscience and free profession, practice, and propagation of religion.
- Article 26: Rights of religious denominations to manage their own affairs.
- Freedom of association: Article 19(1)(c) protects the right to form associations. The Supreme Court in Noel Harper v. Union of India (2022) case has held that receiving foreign contribution is not an absolute fundamental right, but regulation must not be arbitrary.
Other Key Provisions of the 2026 Amendment Bill
- Government Power Over Assets: If registration is not restored, the government can transfer assets to a government department.
- It can also sell those assets, with proceeds going to the Consolidated Fund of India.
- Automatic Cessation of Registration: A new Section 14B is introduced, providing for “deemed cessation” of FCRA registration upon expiry or refusal of renewal.
- Registration automatically stops in three situations:
- Organisation fails to apply for renewal.
- Renewal application is rejected.
- Validity period expires without renewal.
- Time-Bound Utilisation of Funds: The amendment introduces mandatory timelines for the receipt and utilisation of foreign funds to improve financial discipline and transparency.
- Restrictions During Suspension: A suspended organisation cannot sell, transfer, or mortgage its foreign-funded assets.
- Prior government approval is mandatory for any such action.
- Centralised Investigation Control: Section 43 of the parent Act is amended, requiring any law enforcement agency or state government to obtain prior clearance from the Centre before beginning an inquiry into FCRA allegations.
- Rationalisation of Penalties: The amendment reduces the severity of penalties for violations under the Act. The maximum punishment is reduced from five years of imprisonment to one year, or fine, or both.
- Individual Accountability: The definition of “Key Functionary” now includes directors, partners, trustees, karta of Hindu Undivided Family (HUF), office-bearers of societies/trusts/trade unions, and any person with control over management.
- They are personally liable unless they prove lack of knowledge or due diligence.
- Permanent Vesting of Assets: If an organisation shuts down, becomes inactive, or ceases to exist, its foreign-funded assets will permanently vest with the government through the Designated Authority.
Why is Regulating Foreign Contributions Necessary?
- It protects national security and sovereignty from outside interference.
- It prevents money laundering and diversion of money to illegal activities.
- It ensures that the funds are utilised for developmental and charity purposes only.
- It offers transparency and accountability to the working of the NGO.
- Prohibits foreign funding of electoral candidates, journalists, judges, government personnel and political organisations – all of which are barred under FCRA.
Concerns over regulating foreign contributions
- Administrative Delays: The registration and renewal process is time-consuming which affects NGOs’ ability to access funds and carry out activities.
- Political Interference: The government’s discretionary powers to cancel registrations or freeze accounts of NGOs can be misused.
- Hinders development: Stringent Compliance Requirements of foreign contributions affects the social and economic development in India.
- Lack of Transparency: Some NGOs have been criticized for lacking transparency in their utilization of foreign funds received under the FCRA.
Source: TH
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