Foreign Contribution (Regulation) Act (FCRA) and NGO

In News

Recently, the Ministry of Home Affairs has cancelled the Foreign Contribution (Regulation) Act (FCRA) licence of Rajiv Gandhi Foundation (RGF) and Rajiv Gandhi Charitable Trust (RGCT).

  • These organisations are associated with the Nehru-Gandhi family, for alleged violations of the provisions of the Act.

Foreign Contribution (Regulation) Act (FCRA)

  • Aim: 
    • To regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and 
    • To prohibit such acceptance and utilisation for any activities detrimental to the national interest.
  • Origin: 
    • The law was enacted during the Emergency in 1976 amid apprehension that foreign powers were interfering in India’s affairs by pumping in funds through independent organisations. 
    • These concerns had been expressed in Parliament as early as in 1969. 
  • Function: 
    • The law sought to regulate foreign donations to individuals and associations so that they functioned in a manner consistent with the values of a sovereign democratic republic.
  • Amendment: 
    • An amended FCRA was enacted under the UPA government in 2010. 
    • The law was amended again by the current government in 2020, giving the government tighter control and scrutiny over the receipt and utilisation of foreign funds by NGOs. 
    • A legal challenge to the 2020 amendments was rejected by the Supreme Court in April this year.
  • Provisions of the Act:
    • Every person or NGO wishing to receive foreign donations to be registered under the Act, 
    • To open a bank account for the receipt of the foreign funds in State Bank of India, Delhi.
    • To utilise those funds only for the purpose for which they have been received, and as stipulated in the Act.
    • They are also required to file annual returns, and they must not transfer the funds to another NGO.
    • The Act prohibits receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.
  • Registration under FCRA:
    • NGOs that want to receive foreign funds must apply online in a prescribed format with the required documentation. 
    • The registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programmes.
    • Post application, the MHA makes inquiries through the Intelligence Bureau into the antecedents of the applicant, and accordingly processes the application. 
    • The MHA is required to approve or reject the application within 90 days — failing which it is expected to inform the NGO of the reasons for the same.
  • Validity and Renewal: 
    • Once granted, FCRA registration is valid for five years. 
    • NGOs are expected to apply for renewal within six months of the date of expiry of registration. In case of failure to apply for renewal, the registration is deemed to have expired.
  • Cancellation of approval:
    • The government reserves the right to cancel the FCRA registration of any NGO if it finds it to be in violation of the Act. 
    • Registration can be cancelled for a range of reasons:
      • If in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate. 
    • Once the registration of an NGO is cancelled, it is not eligible for re-registration for three years. 
    • All orders of the government can be challenged in the High Court.

New guidelines to banks on Foreign Contribution (Regulation) Act rules

  • State Bank of India’s New Delhi branch: A new provision that makes it mandatory for all NGOs to receive foreign funds in a designated bank account at the State Bank of India’s New Delhi branch was inserted.
  • Designated FCRA account: All NGOs seeking foreign donations have to open a designated FCRA account at the SBI branch.
    • The NGOs can retain their existing FCRA account in any other bank but it will have to be mandatorily linked to the SBI branch in New Delhi.
  • Only banking channels allowed: Foreign contribution has to be received only through banking channels and it has to be accounted for in the manner prescribed.
  • OCI or PIO: Donations are given in Indian rupees by any foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contributions.
  • Sovereignty and integrity: It requires NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.

Major Criticisms

  • Unnecessary International Criticism:
    • Significantly all the NGOs on the latest list work on climate change and environmental projects and/or child rights and slavery projects.
    • These are the subjects where the government has been sensitive to international criticism.
  • International Pressure regarding Law Making and over-compliance:
    • Despite India’s record in complying with the Paris agreement, global pressures are intensifying on India to raise the Nationally Determined Contributions.
    • It is detrimental to the Indian image and poverty reduction plans.
  • NGOs involved in violation of FCRA:
    • Several pro­climate NGOs are focusing on advocacy against coal in the media.
    • It is considered a violation of FCRA provisions. 
  • Biassed data and poor ranking on several Indices:
    • In 2017, the International Labour Organisation’s Global Slavery Index ranked India 53rd of 167 countries where 
      • “modern slavery” was prevalent, and 
      • as the country with the highest number of people in forced labour.
    • MHA questioned the credibility of the data.
  • Internal Security:
    • 3 US non-governmental organisations were found to be fuelling protests at the Kudankulam Nuclear Project Site after strained Indo-US relations.
  • Fraught issue for several years:
    • FCRA clearances have been a fraught issue for several years, and the government has often been accused of targeting NGOs for political or ideological reasons by cancelling or not renewing their clearances.

How else can one receive foreign funding?

  • Prior permission: The other way to receive foreign contributions is by applying for prior permission.
    • A letter of commitment from the foreign donor specifying the amount and purpose is also required.
  • Specific activities or projects: It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
  • Registration: The association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.

RBI’s oversight over Bank

In News

  • The Reserve Bank of India (RBI) has recently placed Dhanlaxmi Bank under tight monitoring due to falling Capital Adequacy Ratio.   

About the current issue 

  • It is a Thrissur-based private bank. 
    • The RBI’s move comes in the wake of the intense court battle waged by a group of minority shareholders against the bank’s management team over inadequate financial disclosures, rising expenses, and general mismanagement of the business
  • Dhanlaxmi Bank’s capital to risk-weighted assets ratio (CRAR) dropped to around 13% at the end of March this year from 14.5% a year ago. Banks are supposed to maintain their CRAR at 9% or above according to Basel-III norms. 
    • The bank has even been placed under the prompt corrective action framework (PCA) by the RBI to deal with serious deteriorations in its financial position.
      • Under the PCA, the RBI places restrictions on lending by troubled banks and keeps a close eye on them until their financial position improves sufficiently. 
What is Capital Adequacy Ratio?It is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk-weighted assets.What are Basel-III norms? These were adopted by financial regulators across the globe in the aftermath of the financial crisis of 2007-08 that involved major failures in the banking system.Banks are supposed to maintain their CRAR at 9% or above.  

Importance of capital adequacy  

  • The CRAR is a ratio that compares the value of a bank’s capital (or net worth) against the value of its various assets weighted according to how risky each asset is, and is used to gauge the risk of insolvency faced by a bank. 
    • The riskier a type of asset held in a bank’s balance sheet, the higher the weightage given to the value of the asset while calculating the bank’s capital adequacy ratio. 
    • This causes the capital adequacy ratio of the bank to drop, thus signalling a higher risk of insolvency during crises.
  • CRAR tries to gauge the risk posed to the solvency of the bank by the quality or riskiness of the assets on the bank’s balance sheet. 
  • A bank cannot continue to operate if the total value of its assets drops below the total value of its liabilities as it would wipe out its capital (or net worth) and render the bank insolvent.
    • The capital position of a bank should not be confused with cash held by a bank in its vaults to make good on its commitment to depositors. 
  • Banking regulations such as the Basel-III norms try to closely monitor changes in the capital adequacy of banks in order to prevent major bank failures which could have a severe impact on the wider economy.

Way forward

  • The Bank has been trying to issue additional shares in the open market through a rights issue in order to deal with its capital adequacy woes.  
    • Through a rights issue, the bank will be able to raise more equity capital from existing shareholders.
      • The rights issue has been delayed by the ongoing court battle. 
    • This is in contrast to an initial public offering where shares are issued to new shareholders.
  • The additional capital could help in raising the bank’s capital adequacy ratio which is necessary to comply with regulations and serve as a buffer that absorbs any losses incurred by the bank on its loan book in the case of any crisis in the future. 

UN’s 77th-Anniversary

In News

  • Recently the world celebrated the annual commemorative day celebrating the 77 years since the creation of the United Nations.

More about the news

  • During the event External Affairs Minister said that India will always stand with the Global South and seek to strengthen the U.N.’s effectiveness.
  • He also stated that India’s ongoing tenure as a member of the UNSC has reflected its principled approach of promoting dialogue and diplomacy to meet contemporary challenges. 

The United Nations

  • Origin and members:
    • The United Nations came into existence on October 24, 1945, as the Charter was ratified was by the 5 permanent Security Council members – China, France, Russia, UK, US – and a majority of other countries. 
      • At present, it has 193 member states, and is headquartered in New York City, with main offices in Geneva, Nairobi, Vienna, and The Hague.
  • Purpose of formation:
    • A successor to the League of Nations, the UN was formed after World War II to prevent future wars. 
    • Its stated purposes are to maintain international peace and security, develop friendly ties among countries, and achieve international cooperation.
  • The organization’s objectives include:
    • Maintaining international peace and security, 
    • Protecting human rights, 
    • Delivering humanitarian aid, 
    • Promoting sustainable development, and 
    • Upholding international law.
  • The six principal organs of the United Nations are:
    • General Assembly
    • Security Council, 
    • Economic and Social Council, 
    • Trusteeship Council, 
    • International Court of Justice, and the 
    • UN Secretariat
About the principal organs of the United NationsGeneral Assembly:It can be loosely called the parliament of the United Nations Organisation.Some decisions like budget, admission of new members and peace and security are taken by two-thirds majority to be passed. Other decisions require only a simple majority.United Nations Security Council:It has the primary responsibility of maintenance of peace and security in the international community.It comprises of 15 members, which can be divided in 2 categories:Permanent members: Also called as the P-5 members. It is comprised of US, Russia, China, France and the United Kingdom. They have veto powers, which essentially means that passing of a decision in the UNSC must have each P5 member’s concurrence.Elected Members: There are 10 non-permanent members. They are elected by the General Assembly and have a tenure of 2 years each.Economic and Social Council:It is responsible for coordinating the economic and social fields of the organization.ECOSOC serves as the central forum for discussing international economic and social issues, and formulating policy recommendations addressed to member states and the United Nations System.The Council consists of 54 Member States, which are elected yearly by the General Assembly for overlapping three-year terms. Trusteeship Council:It is established to help ensure that trust territories were administered in the best interests of their inhabitants and of international peace and security.The trust territories:Most of them former mandates of the League of Nations or territories taken from nations defeated at the end of World War II—have all now attained self-government or independence, either as separate nations or by joining neighbouring independent countries.The International Court of JusticeThe International Court of Justice, also known as the World Court. It was established in June 1945 by the Charter of the United Nations and began work in April 1946. The seat of the Court is at the Peace Palace in The Hague (Netherlands).Role and Responsibilities: The Court settles legal disputes submitted to it by States, in accordance with international law.  It also gives advisory opinions on legal questions referred by authorised UN organs and specialised agencies. Judgments in disputes between States are binding.  The Court decides disputes between countries, based on the voluntary participation of the States concerned. If a State agrees to participate in a proceeding, it is obligated to comply with the Court’s decision.UN Secretariat:The secretariat is the UN’s executive arm. The secretariat has an important role in setting the agenda for the deliberative and decision-making bodies of the UN (i.e., the General Assembly, Economic and Social Council, and Security Council), and the implementation of the decision of these bodies. The secretary-general, who is appointed by the General Assembly, is the head of the secretariat.

Why is the UN needed?

  • UN’s specialized agencies:
    • The United Nations along with its specialized agencies assumes a significant job in keeping up harmony and security of the world nations. 
    • The UN specialized agencies like the Food and Agriculture Organization (FAO), UNICEF, World Health Organization, etc have done noteworthy work in the growth and development of developed and developing countries. 
  • Forum for discussion:
    • It is a stage that provides a forum for discussion for the members to come to a common understanding. 
  • Relevance:
    • United Nations is as relevant in the present time as it was at the point when it was established. It is the only organization to have universal membership.
    • The UN since its inception is actively working in this regard for maintaining peace, ensuring development, and cooperation among nations and has devised various initiatives to prevent conflict.
The Global SouthThe Global South has traditionally been used within intergovernmental development organizations –– primarily those that originated in the Non-Aligned Movement­ ­–– to refer to economically disadvantaged nation-states and as a post-cold war alternative to “Third World.” However, in recent years and within a variety of fields, the Global South is employed in a post-national sense to address spaces and peoples negatively impacted by contemporary capitalist globalization.

Rishi Sunak: UK’s first Indian-origin PM

In News

  • Recently, the Indian-origin and country’s former Chancellor Rishi Sunak has been elected as the next Prime Minister in the UK. 
    • He is also the UK’s first prime minister of Indian origin

About the current crisis in UK 

  • Britain is facing a triple whammy of:
    • Slowing growth
    • High inflation triggered by spiralling energy prices in the wake of the Ukraine war 
    • Budget shortfall that has eroded its financial credibility internationally.   
What is a Free Trade Agreement?A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.The concept of free trade is the opposite of trade protectionism or economic isolationism.

India-UK ties 

  • Political
    • UK-India relationship is rooted in India’s colonial history with the British.
    • The UK supports India’s proposal for permanent membership of the UNSC and is also an important interlocutor for India on global platforms.
  • Geopolitics
    • The Indo-UK Free Trade Agreement will remain on course, and the deepening of the bilateral defense cooperation will continue to meet the challenges of a rising China.
  • Defence
    • Ajeya Warrior (army-to-army biennial exercise), the Konakan (joint navy-to-navy annual exercise) and the Indradhanush (joint air-to-air exercise) happen between India and UK.
  • Free trade agreement 
    • Both countries formally launched talks for a free trade agreement. It has been delayed due to issues such as migration
      • In such pacts, two countries either eliminate or significantly reduce customs duties on the maximum number of goods traded between them, besides easing norms for promoting investments and services trade. 
    • The countries have missed the Diwali deadline for concluding the negotiations because of political developments in the UK.
      • Political stability in the UK now would help fast-track the negotiations for the pact, which would give a boost to the bilateral trade and investments between the countries.
  • Bilateral Trade and foreign direct investment 
    • The UK is also a key investor in India. India attracted foreign direct investment of USD 1.64 billion in 2021-22. The figure was about USD 32 billion between April 2000 and March 2022.
    • India’s main exports to the UK include ready-made garments and textiles, gems and jewellery, engineering goods, petroleum and petrochemical products, transport equipment and parts, spices, metal products, machinery and instruments, pharma and marine items.
    • Major imports include precious and semi-precious stones, ores and metal scraps, engineering goods, professional instruments, non-ferrous metals, chemicals and machinery.
  • Service Sector 
    • Services make up around 70 per cent of annual trade between our countries. 
    • In the services sector, the UK is one of the largest markets in Europe for Indian IT services. 
    • The bilateral trade increased to USD 17.5 billion in 2021-22 compared to USD 13.2 billion in 2020-21. 
    • India’s exports stood at USD 10.5 billion in 2021-22, while imports were USD 7 billion. 
  • Indian Diaspora 
    • As far as Indian-origin people in the UK are concerned, numbering 1.4 million, they account for 2.5 percent of the overall British population.
The following are some prominent persons of Indian origin occupying high posts in other parts of the world:Antonio Costa, Prime Minister, PortugalMohamed Irfaan, President, GuyanaPravind Jugnauth, Prime Minister, MauritiusPrithvirajsing Roopun, President, MauritiusChandrikapersad Santokhi, President, SurinameKamala Harris, Vice President, United States

Importance of India-UK Relation

  • Regional balance: 
    • Britain is tilting to the Indo-Pacific, where India is a natural ally. India, which is looking at a neighbourhood that has been transformed by the rise of China, needs as wide a coalition as possible to restore regional balance.
  • Trade, Investment & Jobs: 
    • India-UK trade was worth £23 billion in 2019, and both countries want to double the figure by 2030. Almost half a million jobs are supported across India and the UK through investments in each other’s economies.
  • Market for British goods: 
    • A free trade deal of the UK with India – the world’s largest democracy, fifth biggest economy, a nation of 1.4 billion people will create a huge market for British goods like whisky, cars and services.
  • Benefits for Businesses:
    •  A trade deal with India will break down barriers and make it easier for British businesses to secure more investments, higher wages and lower prices in Britain.
  • Better productivity:
    • The FTA with the UK is expected to provide certainty, predictability and transparency and will create a more liberal, facilitative and competitive services regime.
  • Export:
    • FTA negotiations with the UK are expected to increase our exports in Leather, Textile, and Jewellery and processed Agri products. 
    • India is also expected to register a quantum jump in the export of Marine Products through the recognition of 56 marine units of India.
  • Skilled Labour Access: 
    • India will be looking for concessions on Indian skilled labour accessing UK markets.
  • Defence Strengths: 
    • Britain could also contribute to the strengthening of India’s domestic defence industrial base. The two sides could also expand India’s regional reach through sharing of logistical facilities.
  • Democracy and diaspora:
    • Both India and the UK are vibrant democracies, with a partnership built on shared history and rich culture. 
    • The diverse Indian diaspora in the UK, who act as a “Living Bridge”, adds further dynamism to the relations between the two countries.

Concerns in India-UK Relation 

  • Bitter Past: 
    • The bitter legacies of the Partition, anti-colonial resentment and Britain’s prejudices and its perceived tilt to Pakistan have long complicated the engagement between India and the UK.
  • Political Negativity: 
    • While there is no way of fully separating South Asian and British domestic politics, India’s problems have been accentuated by the British Labour Party’s growing political negativity towards India.
  • WTO related issues: 
    • Interim FTA that do not convert into full FTAs can also face challenges from other countries at the World Trade Organisation(WTO) because the latter only permits for the preferential treatment between countries which have bilateral agreements between them.
  • Domestic Politics: 
    • The large South Asian diaspora in the UK transmits the internal and intra-regional conflicts in the subcontinent into Britain’s domestic politics.
  • Engagement with EU: 
    • The UK needs to sort out its own internal deliberations on the future of its trajectory with the EU.

Way forward

  • He might raise tax rates and make spending cuts that will be unpopular and may have unforeseen political consequences.
  • It now appears increasingly likely that the FTA will be signed only sometime in 2023. 

Health Impact of Climate Change

In News

  • Recent Lancet Report stated that over 3,30,000 people died in India due to exposure to particulate matter from fossil fuel combustion in 2020.

Key Findings

  • About: 
    • The Report is named Countdown on health and climate change: health at the mercy of fossil fuels
    • It is the seventh annual global report. 
  • Effect on Temperature:
    • From 2000-2004 to 2017-2021, heat-related deaths increased by 55% in India.
  • Problematic actions of Government and Companies:
    • They continue to follow strategies that increasingly threaten the health and survival of all people alive today, and of future generations.
    • Subsidy: 
      • In 2019, India had a net negative carbon price, indicating that the government was effectively subsidising fossil fuels. 
      • India allocated a net 34 billion USD [around ?2,80,000 crore] to this in 2019 alone, equivalent to 37.5% of the country’s national health spending that year. 
    • Biomass and fossil fuels: 
      • Accounted for 61% of household energy in 2019, while fossil fuels accounted for another 20%. 
      • With this high reliance on these fuels, average household concentrations of particulate matter exceeded the World Health Organisation (WHO) recommendation by 27-fold nationally and 35-fold in rural homes.
  • Urban Centres: 
    • In India, 45% of urban centres are classified as moderately green or above. 
  • Economic Loss:
    • In 2021, Indians lost 16,720 crore potential labour hours due to heat exposure with income losses equivalent to about 5.4% of national GDP.
  • Health Impacts:
    • Dengue: 
      • For India, from 1951-1960 to 2012-2021, the number of months suitable for dengue transmission by Aedes Aegypti rose by 1.69%, reaching 5.6 months each year.
    • Heatwave: 
      • From 2012-2021, infants under one year old experienced a higher number of heatwave days.
      • For the same period, adults over 65 experienced 301 million more person-days. 
        • This means that, on average, from 2012-2021, each infant experienced an additional 0.9 heatwave days per year while adults over 65 experienced an additional 3.7 per person, compared to 1986-2021.
      • From 2000-2004 to 2017-2021, heat-related deaths increased by 55% in India.
  • Agriculture: 
    • The duration of the growth season for maize has decreased by 2%, compared to a 1981-2010 baseline.
    • Rice and winter wheat have each decreased by 1%.
  • Negative exposure: 
    • Households are exposed to energy poverty, and dangerous levels of air pollution

What is Particulate Matter (PM?

  • Particulate matter (PM) are inhalable and respirable particles composed of sulphate, nitrates, ammonia, sodium chloride, black carbon, mineral dust and water.
  • PM2.5:
    • PM2.5, particulate matter consisting of fine aerosol particles measuring 2.5 microns or smaller in diameter, is one of six routinely measured criteria air pollutants .
    • It is commonly accepted as the most harmful to human health due to its prevalence in the environment and the broad range of health effects.
    • It is generated from many sources and can vary in chemical composition and physical characteristics. 
    • Common chemical constituents of PM2.5 include sulphates, nitrates, black carbon, and ammonium. 
    • The most common human-made sources include internal combustion engines, power generation, industrial processes, agricultural processes, construction, and residential wood and coal burning. The most common natural sources for PM2.5 are dust storms, sandstorms, and wildfires.

Way Ahead

  • Urban redesign that puts health first can provide increased green space that reduces urban heat, improves air quality, and benefits physical and mental health.
  • Improvement in air quality will help to prevent deaths resulting from exposure to fossil fuel-derived particulate matter.
  • States should start adapting and implementing heat action plans in each city. For instance, the Ahmedabad heat action plan that has shown mortality can be reduced, should be adapted everywhere.
  • The burning of dirty fuels needs to be minimised as soon as possible to reduce the accompanying health impacts.
  • Global warming and climate change is intricately related to human health and India needs to do something seriously in this space.

Pakistan is off FATF’s Grey List

In Context

  • Recently, Financial Action Task Force (FATF), the global watchdog on terror financing and money laundering removed Pakistan from its grey list.
    • Pakistan has been on the FATF grey list continuously since June 2018.


  • FATF decided by consensus that Pakistan has completed all substantial, technical and procedural requirements of both the 2018 and 2021 action plans and as a result, 
  • Pakistan has been taken off the list of jurisdictions under increased monitoring, with immediate effect.

About Financial Action Task Force (FATF)

  • Established: It was established at the G7 Summit of 1989 in Paris.
  • Aim: To address loopholes in the global financial system after member countries raised concerns about growing money laundering activities. 
  • The FATF currently has 39 members. India is a member country.
  • The decision-making body of the FATF, known as its plenary, meets thrice a year. 
  • Its meetings are attended by 206 countries of the global network, including members, and observer organisations, such as the World Bank, some offices of the United Nations, and regional development banks.
  • The FATF sets standards or recommendations for countries to achieve in order to plug the holes in their financial systems and make them less vulnerable to illegal financial activities. 
  • For the countries that don’t perform well on certain standards, time-bound action plans are drawn up. 
  • Recommendations for countries range from assessing risks of crimes to setting up legislative, investigative and judicial mechanisms to pursue cases of money laundering and terror funding.
  • FATF’s ‘grey’ and ‘black’ lists:
    • At the end of every plenary meeting, FATF comes out with two lists of countries. 
    • The grey countries are designated as “jurisdictions under increased monitoring”, working with the FATF to counter criminal financial activities. 
      • For such countries, the watchdog does not tell other members to carry out due-diligence measures vis-a-vis the listed country but does tell them to consider the risks such countries possess. 
    • As for the black list, it means countries designated as ‘high-risk jurisdictions subject to call for action. 
  • Currently, North Korea and Iran are on the blacklist.
  • Consequence of being in the List
    • Being listed under the FATF’s lists makes it hard for countries to get aid from organisations like the International Monetary Fund (IMF), Asian Development Bank (ADB), and the European Union. It may also affect capital inflows, foreign direct investments, and portfolio flows.


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