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 TrustBridge will make grants to Indian charities, in several important ways.

The full law is available online. We also suggest a summary of the law from the Centre for the Advancement of Philanthropy.

Within the law, there are four main changes that are most likely to impact TrustBridge 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 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.

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. TrustBridge will continue grantmaking to Indian nonprofits through existing bank accounts in this transition period. 

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.

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