Context: Five years after it cancelled the registration of international non-governmental organisation (NGO) Greenpeace to receive foreign funds, the government has moved to restrict the funding for a group of 10 American, Australian and European NGOs dealing with environmental, climate change and child labour issues.


  • Reserve Bank of India stated that the government had specified a number of foreign entities to be placed on the “Prior Reference Category” (PRC list) using the stringent Foreign Contribution Regulation Act 2010.
  • The regulation was tightened in September 2020, making both banks and chartered accountants accountable for any unauthorised funds that come through.
  • According to the MHA responses in Parliament, between 2016 and 2020, the government cancelled the FCRA licences of more than 6,600 NGOs and suspended those of about 264.

More in the news

  • They add to the more than 80 international voluntary agencies now on the PRC list of the government.
  • The RBI has instructed that any fund flow from the (specified) donor agencies to any NGO/Voluntary organisation/ persons in India should be brought to the Ministry of Home Affairs so that the funds are allowed to be credited to the recipients only after clearance/ prior permission from the MHA’s Foreigners Division of the FCRA wing. 
  • The RBI note had been sent out, in line with previous such circulars sent to banks warning them of NGOs banned or suspended from acquiring or disbursing foreign funds.
  • Significantly all the NGOs on the latest list work on climate change and environmental projects and/or child rights and slavery projects, subjects where the government has been sensitive to international criticism.

Reason behind the so many NGOs on PRC list

  • Environmental and Climate change NGOs
    • Despite India’s record in complying with the Paris agreement, global pressures are intensifying on India to raise the Nationally Determined Contributions.
    • In order to create noise in the media, several pro-climate NGOs are focusing on advocacy against coal, which is considered a violation of FCRA provision.
  • Child labour NGOs
    • In 2017, the Ministry of Home Affairs (MHA) had also objected strongly to the International Labour Organisation’s Global Slavery Index, questioning the credibility of data which had ranked India 53rd of 167 countries where “modern slavery” was prevalent, and as the country with highest number of people in forced labour.
    • The index is part of the Australian Walk Free Foundation’s annual survey that is used by other NGOs working in the field.

Related Facts

FCRA (Amendment), 2020

Key Provisions:

  • Through the amendment, the act bars public servants from receiving foreign contributions. 
  • Public servant under the act includes any person who is in service or pay of the government, or remunerated by the government for the performance of any public duty.
  • The act prohibits the transfer of foreign contributions to any other person who is not registered to accept the foreign contributions under the act.
  • It makes Aadhaar number mandatory for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document.
  • It also states that foreign contributions must be received only in an account designated by the bank as FCRA account in such branches of State Bank of India, New Delhi.
  • The act also proposes that not more than 20% of the total foreign funds received could be defrayed for administrative expenses. Previously this limit was 50%.
  • It allows the central government to permit a person to surrender their registration certificate under the act. 
    • However, it is allowed only after the government is satisfied post an enquiry that such person has not violated any provisions of the FCRA 2010 at the management of its foreign contribution has been invested in an authority prescribed by the government.
  • It also allows the government to restrict the usage of unutilised foreign contribution based on an enquiry which proves that such person has contravened the provisions of the FCRA.

Need for such amendments

  • To monitor Misuse of funds- In Parliament, the government alleged that foreign funds were being used for religious conversions. For instance, in 2017, the government barred American Christian charity, Compassion International.
  • To prevent loss to the GDP- An official report quantifying the GDP losses allegedly caused by environmental NGOs was prepared during the NPA period, indicating a foreign conspiracy against India.
  • To enhance transparency and accountability- The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act.
  • To regulate NGOs- Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.

Issues involved with the Amendment

  • It impacts the livelihoods of workers associated with small NGOs and can cause the killing of the entire social sector as caps on administrative expenses can make it impossible for even the bigger NGOs to perform.
  • There will be a severe impact on collaborative research and critical fields in India as organizations receiving foreign funds will no longer be able to transfer them to small NGOs working at the grassroots level.
  • The amendments are incompatible with the international laws like the UNHRC resolution on protecting human rights defenders which says that no law should criminalize or delegitimize activities in defence of human rights on account of the origin of funding.
  • It also does not comply with India's international legal obligations and constitutional provisions to respect and protect the rights to Freedom of Association, Expression and Freedom of Assembly.
  • New regulations put excessive conditions on civil society organizations, and educational and research institutions that have partnerships with foreign entities.
  • It might crush the competitiveness and creativity of world class NGOs.

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