Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976.

Foreign funding of NGOs, first regulated by the FCRA, 1976, is now governed by the FCRA, 2010 and its rules, which have been progressively tightened — most sharply by the FCRA (Amendment) Act, 2020.

Key changes

• Registration is valid for five years and renewable, replacing the permanent registration of the 1976 regime; a prior-permission route continues for unregistered bodies.
• The 2020 amendment mandates receipt of foreign contribution only in an FCRA account at the SBI New Delhi Main Branch.
• Transfer or sub-granting of foreign contribution to any other person or NGO is prohibited, disrupting collaborative and grassroots delivery models.
• The cap on administrative expenses was cut from 50% to 20%; Aadhaar became mandatory for office bearers; public servants were barred from receiving foreign funds; suspension of registration can extend to 360 days.

Critical evaluation

• Rationale: transparency, curbing diversion of funds and preventing foreign interference in domestic affairs; the Supreme Court upheld the 2020 changes in Noel Harper v. Union of India (2022), holding there is no fundamental right to receive unregulated foreign contributions.
• Concerns: thousands of licences have been cancelled or allowed to lapse, shrinking civic space; the compliance burden falls hardest on small NGOs; vague grounds such as public interest invite discretionary use; UN human rights bodies have flagged a chilling effect on civil society.

Regulating foreign money is legitimate, but enforcement must be rule-based, proportionate and time-bound so that genuine voluntary organisations — recognised as development partners by the National Policy on the Voluntary Sector, 2007 — are not throttled.