Foreign Funding to NGOs and Associated Risks


  • The Supreme Court ruled that the Centre cannot deprive NGOs of their right to receive foreign money by declaring them as political organisations if they use legitimate means of dissent to support public causes. Section 5 of the Foreign Contribution (Regulation) Act, 2010 gives the Union government “unchecked and unbridled powers” to declare an organisation as being one of political nature and deny it access to funds from sources abroad. The Apex Court observed – “It is clear from the provision itself that bandhs, hartals, rasta rokos, etc. are treated as common methods of political action.”
  • Any organisation that supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalised by being declared an organisation of political nature,” the court observed. The court also made it clear that organisations used for channeling foreign funds by political parties cannot escape the rigour of FCRA.

FRCA and NGO’s:

  • NGOs play an important role in the upliftment of the weaker sections of the society and their overall development.
  • This is especially true in the case of India, where a vast majority of its population continues to remain under the poverty line and have little or no access to even basic facilities provided by the government.
  • Every NGO registered or having prior approval under the Act must file an annual report with the Authority in the prescribed form.
  • This report must be accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for the relevant financial year.
  • For financial years where no foreign contribution is received, a ‘NIL’ report must be furnished with the Authority.
  • In case of non-compliance with provisions of the FCRA, the government can penalize an NGO. For example, if these NGOs don’t file annual returns, the government can issue a show-cause notice and subsequently, suspend or cancel their foreign funding licenses.
  • In the last two years, licenses of around 20000 NGOs have been cancelled by the central government after they were found violating various provisions of FCRA act. Hence those NGOs were barred from receiving any foreign funds.

SC’s Judgement:

  • The government cannot prevent NGOs and other social outfits from getting foreign funds just because they used political means to mobilise and awaken people.
  • The statute that prevents organisations of a political nature from receiving foreign funds is to ensure that the administration is not influenced by foreign funds.
  • On the other hand, voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions by enlarging the scope of the term ‘political interests’, it said.
  • Any organisation which habitually engages itself in or employs common methods of political action like ‘bandh’ or ‘hartal’, ‘rasta roko’, ‘rail roko’ or ‘jail bharo’ in support of public causes can also be declared as an organisation of political nature, according to rules under the FCRA.
  • The judges, however, said organisations which were not involved in active politics or party politics would not come under these rules.
  • Support to public causes by resorting to legitimate means of dissent such as bandh and hartal cannot deprive an organisation of its legitimate right of receiving foreign contribution, the bench said. It is clear from the provision itself that bandh, hartal, rasta roko etc., are treated as common methods of political action, it added.
  • The rule would, however, apply to organisations used by political parties for channelling foreign funds provided there was concrete material to prove that, the court said.

What is ‘public interest’?

  • The FCRA regulates the receipt of funding from sources outside of India to NGOs working in India.
  • It prohibits receipt of foreign contribution “for any activities detrimental to the national interest”.
  • The Act specifies that NGOs require the government’s permission to receive funding from abroad.
  • The government can refuse permission if it believes that the donation to the NGO will adversely affect “public interest” or the “economic interest of the state”.
  • This condition is manifestly overbroad. There is no clear guidance on what constitutes “public interest”.

Government’s accusation against NGOs:

  • A government could construe any disagreement with, or criticism of, any of its policies as being against public interest.
  • For example, in 2014, several groups including Greenpeace were accused by the Intelligence Bureau of stalling India’s economic development.
  • In the government’s narrow view, public interest is interpreted as being equivalent to its priorities. That is simply not the case.
  • Thus, an environmental or human rights organisation criticising the government can be accused of “acting against public interest”.

Foreign Funding:

  • The Foreign Contribution (Regulation) Act, 2010and rules framed under it (the “FCRA” or “Act”) regulate the receipt and usage of foreign contribution by non-governmental organisations (“NGOs”) in India.
  • The intent of the Act is to prevent use of foreign contribution or foreign hospitality for any activity detrimental to the national interest.
  • It has a very wide scope and is applicable to a natural person, body corporate, all other types of Indian entities (whether incorporated or not) as well as NRIs and overseas branches/subsidiaries of Indian companies and other entities formed or registered in India.
  • It is implemented by the Ministry of Home Affairs, Government of India.
  • Prohibits acceptance and use of foreign contribution or foreign hospitality by a certain specified category of persons such as a candidate for election, judge, journalist, columnist, newspaper publication, cartoonist and others.
  • Regulates the inflow to and usage of foreign contribution by NGOs by prescribing a mechanism to accept, use and report usage of the same.
  • It defines the term ‘foreign contribution’ to include currency, article other than gift for personal use and securities received from foreign source. While foreign hospitality refers to any offer from a foreign source to provide foreign travel, boarding, lodging, transportation or medical treatment cost.
  • The Act permits only NGOs having a definite cultural, economic, educational, religious or social programme to accept foreign contribution, that too after such NGOs either obtain a certificate of registration or prior permission under the Act.
  • In order to be registered under the FCRA, an NGO must be in existence for at least three years and must have undertaken reasonable activity in its field for which the foreign contribution is proposed to be utilised. Further, it must have spent at least INR 1,000,000 over three years preceding the date of its application on its activities.
  • The registration certificate is valid for a period of five years and must be thereafter renewed in the prescribed manner.
  • NGOs not eligible for registration can seek prior approval from FCRA for receiving foreign funding. This permission is granted only for a specific amount of foreign funding from a specified foreign source for a specific purpose. It remains valid till receipt and full utilisation of such amount.

Way forward:

  • The SC has sought to draw a distinction between the overtly political activity and normal activity of the NGO.
  • National Accreditation Council consisting of academicians, activist, retired bureaucrats should be made to ensure compliance by NGOs.
  • There should be better coordination between Ministries of Home Affairs and Finance in terms of monitoring and regulating illicit and unaccounted funds.
  • A regulatory mechanism to keep a watch on the financial activities of NGOs and voluntary organizations is the need of the hour.
  • Foreign funding will delay our strategic activity so there should be monitoring but there cannot be blanket ban on receiving of foreign funds.
  • Citizens today are keen to play an active role in processes that shape their lives and it is important that their participation in democracy go beyond the ritual of voting and should include promotion of social justice, gender equity, inclusion etc.
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