The Ministry of Home Affairs released guidance indicating that FCRA-Registered nonprofits have until March 31, 2021 to open the new designated FCRA bank account. Nonprofits do not need to visit the State Bank in Delhi to open this account. Funders may consider resuming grantmaking to Indian nonprofits in this transition period.
This page will be updated as new information is made available about this law. Please bookmark it for future reference. Last updated October 13, 2020.
A new law that was signed on September 28, 2020 will greatly tighten and restrict the existing Foreign Contribution Regulation Act (FCRA). FCRA is the cornerstone law that regulates how nonprofits in India can receive foreign funding, including from U.S.-based foundations and corporations.
The new law took effect September 29, 2020.
In short, the law is likely to impact how foundations and corporations make grants to Indian NGOs, in several important ways.
Within the law, there are four main changes that are most likely to impact grantmakers supporting Indian grantees:
Re-Granting Relationships are Not Permissible
Any grant made to an Indian nonprofit would not allow re-granting or sub-granting. This means that funders who currently use FCRA-registered nonprofits as a re-granter to support other FCRA-registered Indian nonprofits may no longer do so. Additionally, Indian nonprofits who serve as a lead implementers on a given project may no longer create sub-grant relationships with other nonprofits using foreign funding.
State Bank of India Accounts Required
Previously, nonprofits receiving foreign funding under FCRA needed to create a bank account at any government-approved bank. Under the amended FCRA, all nonprofits must create and solely use a new account with the State Bank of India at New Delhi. The respective branch of the State Bank of India at New Delhi is required to report the contribution and its intended use to the central government.
Administrative Expenses Capped at 20% (instead of 50%)
Previously, nonprofits receiving foreign funding could utilize up to 50% of foreign funds in a given fiscal year on administrative expenses. Under the amended FCRA, administrative expenses are now capped at 20% of foreign funds received.
Nonprofits Can Forfeit FCRA Status
Currently, there is no way for nonprofits in India to voluntarily forfeit their FCRA registration. Under the amended FCRA, there is now a means to do so but assets previously created with foreign funds may then need to be transferred to the appropriate government arm.
Foundations, intermediaries, and other grantmakers who make grants to India will be subject to these regulations when the law is enacted.
Given that the law went into effect September 29, 2020, we recommend that grantmakers actively supporting Indian nonprofits quickly take four steps:
- Assess your current granting relationships with Indian nonprofits, including noting whether you have any sub-granting or re-granting relationships. The amended FCRA will significantly impact the many U.S. grantmakers who utilize larger Indian nonprofits to serve as project leads or redistributors of foreign funding locally.
- If you are currently providing general operating support to an Indian nonprofit via an equivalency determination, consider revising your grant agreement/relationship to ensure that the grantee is only spending 20% of the funds on administrative expenses. Communicate with your Indian partners that the 20% cap is for all foreign funding received in a fiscal year, so the charity must ensure that that either 20% of all grants they receive are dedicated to administrative expenses, or that the ultimate administrative expense percentage from multiple grants equates to 20% at the end of the year.
- Ensure that your Indian partner creates a new bank account with the State Bank of India at New Delhi and provides you with the new bank information. It is important for grantmakers to know that this new account will likely be heavily monitored by the central government and will equate to more oversight of foreign funding than in the past.
- Make sure that your Indian partners know that if they are considering forfeiting their FCRA registration, under the new regulatory regime any projects or assets previously created with foreign funds, such as a hospital or school, may become property of the appropriate government entity when the nonprofit forfeits their registration.
Further reading on The Indian Foreign Contribution (Regulation) Amendment Law 2020:
- Alliance Magazine: FCRA Bill’s impact on civil society in India
- Centre for Social Impact and Philanthropy at Ashoka University: How the Proposed FCRA Amendments Hurt India’s Development and Democracy
- VANI (India’s NGO Association): Request to refer FCRA bill, 2020 to a Select/Standing Committee of the Parliament