Why NGOs operating on foreign funds are opposing new FCRA Amendment bill, rules

On a Sunday last month, churches of several denominations held special services across India. The Joint Action Forum on Minorities called for a ‘National Day of Fasting and Prayer’. The reason was a proposed law, or rather, the amendment in an existing one — the Foreign Contribution (Regulation) Amendment Bill, 2026, which aims to replace the Foreign Contribution (Regulation) Act, (FCRA), 2010 and was introduced in Parliament in March this year.

While the draft bill is still pending passage in the legislature, the Centre notified the FCR Amendment Rules, 2026, on June 22. How? Because rules are different from bills (or Acts, which is what a bill becomes once it is passed in parliament) and do not need legislative approval. They do not need to be passed in parliament and any concerned ministry may make them effective by publishing them in the official gazette, the government’s legal notice board. Which is what happened in this case.

While Acts passed in parliament are often a broad framework of law, rules are details of execution.

The FCR Amendment Rules, 2026, would have a “tremendous, tremendous” impact on the NGO sector, says Noshir H Dadrawala, chief executive of the Mumbai-based Centre for Advancement of Philanthropy, which advises non-profits on compliance. “It is quite debilitating for some.”

He adds: “This is fundamentally a change in law. It should have been put before parliament. But now, it has been introduced as new rules so that it doesn't have to go to the parliament.”

The concern runs especially deep among Christian and Muslim trusts running schools, hospitals, hostels and other such philanthropic establishments.

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To understand why the amendment bill/rules are triggering such worry, one needs to understand what’s changed and how it impacts organisations covered under its purview.

The FCRA was first passed in 1976. It was replaced with a new law in 2010. The 2026 bill says the foreign money, and any property bought wholly or partly with it, will “vest” in a government-appointed official called a ‘designated authority’. To vest simply means that control and custody pass over. In plain terms: lose the licence and the government can take charge of the assets. That applies whether the licence was cancelled, given up, refused renewal or simply allowed to expire.

The rules draw sharp new lines around what an organisation may do. The bill puts a heavy consequence, loss of assets, behind any failure of the licence. A mistake that begins as a paperwork dispute could, critics fear, end with an institution’s property in government hands.

“The FCRA, when it was designed, and for the past 30-40 years, categorised activities [for which one can accept funds] into four-five slots, like cultural, religious, economic, educational, social. Those five heads survive. But under each, the schedule now sets out a closed list of 105 named activities, making the previous heads section titles rather than the whole menu,” explains an accountant working with Indian and international NGOs, speaking on condition of anonymity.

He adds: “So, instead of telling NGOs what they can’t do, they are saying what they can do. But the problem is that donor programmes are not necessarily designed along those 105 items. So the challenge for NGOs will be to match donor expectations with the regulation.”

Consider a practical situation — a mission campus in a remote district in India. It may run a school, a hostel for girls from marginalised communities, a dispensary, a maternal-health programme, a chapel and flood relief, all from one compound. Its nurses and teachers may belong to a religious order. Prayer may be part of the daily routine, while admission stays open to children and patients of every faith. Now ask, 'is this an educational institution, a social-service organisation or a religious one'?

The new rules do not allow an organisation to tick more than one box.

The most politically sensitive change sits in the religious part of the menu. The rules permit the study and preservation of religious history, theology, scripture and tribal faith practices. But each such activity, the schedule says, must be carried on “excluding proselytisation”.

Proselytisation ordinarily means trying to convert another person to one’s own religion. But the rules do not define the word. Neither does the parent Act. That omission may matter more than the ban itself.

Few would defend charity used as bait for conversion. Introducing the bill, minister of state for home Nityanand Rai said it would be dangerous for those using foreign money for forced conversions, while lawful organisations had nothing to fear. The Constitution, though, draws a finer line than the rules do.

Article 25 of the Constitution guarantees every person the freedom to profess, practise and propagate religion. The question of how far “propagate” goes has reached the Supreme Court in the past. In a 1977 case, the apex court had held that the right to propagate does not include a right to convert another person. On that reasoning, it upheld state laws that punish conversion by force, fraud or allurement. Allurement means offering money, gifts or benefits as inducement.

But note what the court protected in the same breath. Every person retains the right to spread the faith by peaceful explanation of its beliefs. The line was drawn at coercion and inducement, not at persuasion. You may not buy or bully a conversion. You may still talk about your faith.

An undefined ban on proselytisation straddles that line. If officials read it as a ban on coercive conversion, it matches the judgment. If they read it as a ban on any religious persuasion, it goes further than the court allowed.

The government has a ready reply. The rules does not touch anyone’s religious freedom; it merely regulates foreign money. An organisation may still propagate its faith. It just may not use foreign funds to do so.

Organisations claim, however, that the rules put them in the daily dilemma of trying to figure out what they can or cannot do. May a hospital registered under FCRA hand a religious pamphlet to a patient who asks for one? May a hostel hold prayers? May a counsellor say her faith motivates her work?

The second aspect of the rules which has many in the sector worried is “disclosing geographical outreach”, says Dadrawala. “You could be pan-India. Now, every state and union territory that you are functioning in, will have to be pointed out and organisations have to register themselves for it. If one wants to register at an additional location after the licence has been given, there is a Rs 300 fee for it.”

More than the fee, it is the restriction that is bothering many.

Suppose a flood strikes a neighbouring state to the one where an NGO is registered. A relief team from across the border may first need its approved geography altered.

Then there is the matter of expenditure.

There are two ways in which NGOs may register themselves under FCRA, a licence for five years, or prior permission for a particular project, which works as a one-time approval.

In case of a one-time approval, donors usually release grants in instalments, portion by portion, as the project moves. Under the new Rules, however, the second or later instalment can be received only after at least 75 per cent of the previous one has been spent.

In case of licensees, the Rules set a money threshold for what counts as “reasonable activity”. An organisation passes only if it spent at least Rs 10 lakh of foreign contribution over the previous two financial years. Fail the test, and the licence can be refused renewal or cancelled. The threshold is too high for smaller organisations, say those in the know.

“Most organisations largely depend on Indian donations and get some smattering of foreign funds, about two-three lakhs in foreign contributions. That money is still important for a small organisation,” explains Dadrawala.

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Organisations also fear that the assets of a body which loses its registration can be passed to the government-appointed ‘designated authority’ under the 2026 amendment bill. That applies whether the licence was cancelled, given up, refused renewal or simply allowed to expire.

The concern among organisations is not unfounded. According to a Times of India report published earlier this month, which cited Home Ministry data, of 52,159 FCRA licences granted since 2012, only 14,455 are active today. That is barely 27.7 per cent. Nearly three out of every four licences ever granted are dead. The government cancelled 22,498 registrations, most of them from 2015 onward; more than 10,000 associations lost their licences in 2015 alone. Another 15,206 licences were “deemed” cancelled or expired. These are bodies that failed to meet the tightened norms in recent years (this is not the first time that rules have been amended in recent years), or chose not to renew when their five-year term ran out and quietly let the licence lapse.

The government’s case borrows authority from an international body: the Financial Action Task Force, or FATF. FATF is a club of governments that sets global standards against money laundering and terror financing. Every few years it examines each member country and publishes a report card, formally called a mutual evaluation. India’s report card came in September 2024.

The report praised India’s overall system against financial crime. But on one standard, the one covering non-profit organisations, it rated India only “partially compliant”. That finding is often summarised in Delhi as a demand for tighter NGO regulation. The report’s actual language is more complicated, and more interesting. FATF noted that India had identified roughly 7,500 non-profits as being at risk of misuse for terror financing, based on factors such as location, religious functions and funding channels. Logically, the watchful eye should fall on those 7,500. Instead, FATF found, India applies its FCRA requirements to everybody, whatever their risk.

Since the FCR amendment bill/rules have been brought in, the issue has also become something of a political flashpoint.

Dravida Munnetra Kazhagam MP, P Wilson, has alleged the bill treated minority organisations as enemies and was meant to take their properties. Meghalaya chief minister Conrad K Sangma has led representatives of the Presbyterian Church, the Catholic Church and the Garo Baptist Convention to meet union home minister Amit Shah. Their argument was simple. Church-run schools, hospitals and community programmes across Meghalaya depend on donations from abroad. They serve places where government services struggle to reach.

The Khasi Jaintia Christian Leaders Forum, a body of church leaders in the state, wants the Meghalaya assembly to follow Kerala, which passed a resolution earlier this month opposing the changes.

A resolution is a formal expression of the House’s opinion. It has no binding legal force, but it puts a state legislature on record.

Meanwhile, for organisations dependent on foreign funds for their activities, a delayed approval may mean a hostel admits no new batch. A delayed instalment in receiving funds may halt a mobile clinic. An institution unsure whether counselling counts as proselytisation may tell its staff to avoid all conversation about faith. A small body that cannot reach the Rs 10 lakh threshold in two years may conclude that keeping the licence is no longer worth the risk. And the people affected by such quiet erasure of aid will rarely know that the change began with a tick-box on an online form.