Illustration photo shows children from an open access to education project in Odisha State, in India
Photo: Aide à l’Enfance de l’Inde et du Népal
Projects in India funded by foreign not-for-profits risk closing if they fail to open accounts in the country’s state bank.
A handful of Luxembourg non-governmental organisations (NGOs) are among the 20,000 now scrambling to open accounts at the State Bank of India in New Delhi to conform to a tough new law impacting how charities are financed from abroad, which was signed on 28 September 2020.
“This came as a surprise to us and our local partners in India as no previous discussions took place with the NGO sector,” Françoise Binsfeld of Aide à l’Enfance de l’Inde et du Nepal (AEIN) told Delano. The NGO is financing seven projects in India over the next three years focused on education, health, and sustainability, among other things.
She added: “We had to suspend the transfer of funds to India for a few weeks until the guidelines for the bank account opening were published mid-October. Luckily the funds which we transferred at the end of September reached the bank accounts of our local partners and the activities could be implemented as initially planned.”
NGOs have been granted a transition period until the end of March 2021 to conform and open new accounts. “The problem is that all the Indian NGOs are in the process of doing the same thing. There are long delays,” Denise Richard, director of the Fondation Partage told Delano. “India represents 5% of our work. It’s a project that’s complete and risks closing if the partner can’t open the new account.”
Administrative funding restrictions
The bank account is not the only hoop NGOs are being asked to jump through by the Indian government. The law caps at 20% the proportion of donations that NGOs can allocate to administrative costs. “But the law isn’t clear about what it considers administrative costs. Does that include all the salaries?” Richard said, adding that as their partner does awareness raising work, most of its costs are human resource based.
Other changes include new powers for central government body FCRA to investigate and block the renewal of an NGO’s FCRA accreditation, a permit which they must reapply for every five years. Binsfeld explained: “By making all renewal applications subject to inquiry, it authorises the authorities to conduct verifications without having any evidence of non-compliance or any recorded reasons to believe. Such powers are arbitrary and could be misused.” Richard, too, fears this could snuff out projects considered critical of the government.
Meanwhile, a ban on transferring foreign contributions from one NGO to another poses problems for cluster and network projects, in which funds are disbursed by a lead agency to smaller actors, as is the case for AEIN’s partners. “A few partners could not receive funds from us as per the new rules and their part of the budget was used by the lead agencies to implement the project activities. Therefore, we had to discontinue our partnership with some NGOs for projects starting January 2021,” said Binsfeld.
In all, there are 11 Luxembourg-based NGOs active in India. Represenatives from these organisations will meet with the ministry for cooperation at the end of the month to further discuss the situation. Responding to a parliamentary question at the end of December 2020, cooperation minister Franz Fayot said: “We are in contact with our European counterparts as well as with the delegation of the European Union on the subject.”