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Master Circular - Foreign
Contribution (Regulations) Act, 1976 –
Obligations
of Banks in Regulating Receipt of Foreign Contributions by Associations / Organizations
in India
Purpose
The Foreign
Contribution (Regulation) Act, 1976 (FCRA, 1976) casts certain obligation on banks
in regard to acceptance of foreign inward remittances for onward credit to the
accounts of associations/organizations in India. Under Section 10 of Foreign Contribution
(Regulation) Act, 1976 Government has prohibited some of the Associations/Organisations
from receiving foreign contribution. Further, Section 5 of the Act ibid
provides that no organization of a political nature, not being a political party,
can accept foreign contribution except with the prior permission of the Central
Government. The Act also provides that associations having a definite cultural,
economic, educational, religious and social programme should get themselves registered
with the Ministry of Home Affairs, Government of India, New Delhi before receiving
any foreign contribution.
Reserve
Bank has issued guidelines from time to time advising the banks that while accepting
foreign contribution for onward credit to the accounts of association/organization,
it should be ensured that the concerned association/organization is registered
with Ministry of Home Affairs or has their prior permission to receive such foreign
contribution as required under the Act ibid and that no branch other than
the designated branch accepts the foreign contribution. Banks have also been advised
to send a half-yearly report of receipt of such foreign contribution to Central
Government. This Master Circular consolidates all the instructions issued to banks
in this regard from time to time.
Previous instructions
The
instructions issued vide this master circular will supersede all instructions
issued by the Reserve Bank on regulating receipt of foreign contribution by associations/organizations
in India through banking channels. A list of circulars, instructions of which
are being superseded by this master circular, is given in Annex
– I.
Application
These
instructions are applicable to all the scheduled commercial banks excluding RRBs
and all Financial Institutions
Structure
1. Introduction
1.1
Conditions for accepting foreign donations by banks
2.
Guidelines
2.1
General
2.2
Procedure for receiving foreign contributions
2.3
Periodical Reporting to Central Government
2.4
Common Irregularities observed
3.
Annex
4.
Format of Half Yearly Statement
1.
Introduction
1.1
Conditions for accepting foreign donations by banks
Banks
are required to strictly adhere to the provisions of FCRA,1976 while dealing with
receipt of foreign contributions. Section 4 of the Act ibid stipulates
that no foreign contribution shall be accepted by any candidate for election;
correspondent, columnist, cartoonist, editor, owner, printer or publisher of a
registered newspaper; judges, government servants or employees of any corporation;
members of any legislature; political party or office bearer thereof. Subsection
(a) and (b) of Section 10 of the Act provide that Central Government may prohibit
any association not specified in Section 4 ibid or any person from accepting any
foreign contribution or require any association to obtain prior permission of
the Central Government before accepting any foreign contribution. Section 5 of
the above mentioned Act ibid provides that no organization of a political
nature, not being a political party can accept foreign contribution except with
the prior permission of the Central Government. The Act also provides that associations
having a definite cultural, economic, educational, religious and social programme
should get themselves registered with the Ministry of Home Affairs, Government
of India, New Delhi before receiving any foreign contribution.
Such
foreign contributions should be received only through the designated bank branch
the name of which has been specified in the application for registration submitted
to the Ministry of Home Affairs. It is further laid down in the Act that any and
every association referred to in sub-section (1) of Section (6) may, if it is
not registered with the Central Government, accept any foreign contribution
only after obtaining prior permission of the Central Government.
2.
Guidelines
2.1
General
i)
Banks are advised to inform all their branches to keep a special watch on the
accounts of Associations/Organisations and any violation of the provisions of
the Act by them may immediately be brought to the notice of the Ministry of Home
Affairs.
ii)
All the branches of bank dealing in foreign exchange are required to send a half
yearly statement to Government of India containing the details of foreign contribution
received for onward credit to associations/organizations under the Act ibid.
It has been reported by the Government that banks are not furnishing the information
to the Home Ministry regularly. This assumes significance as it is feared that
some part of the foreign donations received through banking channels is getting
diverted to fund unlawful activities. The Government of India has therefore taken
a serious view of the lapses in complying with the provisions of Foreign Contribution
(Regulation) Act, 1976 by banks.
iii)
Banks are advised to bring the contents of the circular to the notice of all their
branches/ controlling offices with instructions to ensure strict adherence to
the instructions issued. Banks should also evolve a system of monitoring compliance
by the branches through the respective controlling offices and fixing of accountability
for lapses observed in this regard.
2.2
Procedure for receiving foreign contributions
Banks
have been advised by Reserve Bank several times to scrupulously adhere to the
provisions of FCRA, 1976. A list of circulars issued earlier in this regard is
annexed. It is reiterated that banks are required to ensure violation of the provisions
of FCRA, 1976
are avoided and procedure as indicated below is followed while receiving foreign
contributions. Accordingly:
(a)
Banks should insist on prior permission of Central Government before accepting
a foreign contribution in the accounts of entities covered under Section 4 and
5 of the FCRA, 1976;
(b)
They should afford credit of the proceeds of cheques/drafts representing foreign
contribution only if the association etc., as indicated in Section 6 of the Act
are registered with the Ministry of Home Affairs, Government of India;
(c)
They should insist on production of a communication from the Ministry of Home
Affairs conveying prior permission of the Central Government for acceptance of
specific amount of foreign contribution in case the association is not registered
under the Foreign Contribution (Regulation) Act, 1976;
(d)
They should not afford credit to the account of such associations as are not registered
with the Ministry of Home Affairs separately for the purpose of accepting foreign
contribution under the Foreign Contribution (Regulation) Act, 1976;
(e)
They should not afford credit to the account of such association as have been
directed to receive foreign contributions only after obtaining prior permission
of the Central Government;
(f)
They should not allow credit of the proceeds of the cheques/demand drafts etc.,
to the organizations of a political nature, not being political parties (including
their branches and units) unless a letter containing the prior permission of the
Central Government under the Foreign Contribution (Regulation) Act, 1976 is produced
by such organizations;
(g)
Banks should note the registration number as conveyed by the Ministry of Home
Affairs to the various associations, in the relevant records particularly the
pages of the ledgers in which the foreign contribution accounts of associations
are maintained to ensure that no unwanted harassment is caused to such associations.
Clarification
Organizations/associations
in India can accept contributions from a "Foreign Source" only if they
are registered with the Ministry of Home Affairs or only after obtaining prior
permission from the above Ministry. The "Foreign Source" for the purpose
of the aforesaid Act has been defined in Section 2(e) of the Act ibid and it is
evident therefrom that remittances from Indians abroad i.e. Indian citizens, for
the purpose of contributing to the aforesaid associations/organizations do not
attract the provisions of FCRA. However, in case of contribution given by the
non-resident foreign citizens of Indian origin through their NRE and FCNR
accounts maintained in India, the provisions of FCRA will be attracted and these
contributions are to be treated as "Foreign ource". Consequently, recipient
associations /organizations would require registration under FCRA or prior permission
of the central Government before accepting contributions from a 'foreign source'.
2.3 Periodical Reporting to Central Government