Mumbai: New Delhi has begun curbing the powers of non-profits with dormant foreign funds.
Over the past 10 days, the home ministry has cancelled the registration of several non-government organisations (NGOs) for failing to use foreign donations.
With this, the government has invoked a rarely used provision of the Foreign Contribution (Regulation) Act, 2010 (FCRA)-the statute regulating such foreign currency inflows. This was triggered, sources feel, after the ministry checked the unused balances lying in the bank accounts of these organisations as on March 31, 2026. The decision to cancel FCRA registration comes after a wave of show-cause notices to NGOs around December 2025, and the ministry's subsequent rejection of the responses to the notices.
"The government has applied Section 14(1)(e) of the FCRA Act. It's seldom used. The cancellations have started over the past one week. We are experiencing cases where the home ministry is cancelling FCRA registration if a non-profit has not utilised foreign grants and donations that it had received three years ago. Our reply, justifying the non-utilisation of funds, stating that there were no suitable projects, was not accepted by the MHA. In a few cases we are planning to appeal on the grounds that there were not appropriate projects where the funds received could be utilised," said senior chartered accountant Gautam Shah who advises many non-profits and charitable trusts.
An organisation whose FCRA registration is cancelled can neither accept fresh foreign donations nor freely spend from the special accounts to hold foreign contributions. Five years ago, all NGOs were directed to open dedicated accounts with a particular New Delhi branch of the State Bank of India branch to receive money from overseas donors-a measure that enabled the ministry to approve and monitor inflows.
NGOs impacted by the state action will now find unused foreign currency donations 'frozen' in their respective bank accounts. And, if a new Bill, which is being fiercely debated, becomes a law, then the frozen funds would be handed over to a designated authority.
Till now, non-profits which allegedly backed religious conversions, or sponsored advocacy of causes that the state disapproves, or were bank-rolled by overseas donors closely linked to certain faith-based organisations have been at the receiving end of FCRA-an Emergency-era law to block disruptive foreign influences. How strongly the government acts against entities with idle dollar donations would be clearer in the coming days.
NEW BILL TO MAKE THINGS HARDER
"So far, most registrations were cancelled for failing to apply foreign donations which were received earlier. However, in cases where domestic funding was sufficient and foreign contributions weren't sought, or contributions were impacted because donors faced restrictions under the Act, a reasoned, fact-based response can prevent cancellation. The context behind alleged inactivity matters-many were not inactive by choice, and there are legitimate and defensible explanations. But silence or a weak response to a show-cause notice could lead to suspension, cancellation, and a three-year bar on fresh registration," said Isha Sekhri, a chartered accountant, who advises NGOs and local entities on cross-border transactions.
In the wake of the amendments proposed in the new Bill, it's widely felt the government would prefer a sterner stance on the use of funds in activities it perceives as sensitive as well as on non-utilisation of money. The Bill makes it unambiguously clear that during the period of suspension an organisation will need the government's permission before transferring or pledging any assets created out of foreign contributions.
"This creates a clear restriction on asset-level actions during suspension and limits operational autonomy. Organisations with ongoing projects or infrastructure assets may face constraints in restructuring, monetising, or otherwise managing such assets during this period," said a note by Sehar Sharma and Rahul Rishi working for the law firm Nishith Desai Associates (NDA).
The amendments, say Sharma and Joshi, signal a transition towards a more controlled and accountability driven regime, and organisations will have to recalibrate internal compliance systems, governance frameworks, and asset management practices.
Over the past 10 days, the home ministry has cancelled the registration of several non-government organisations (NGOs) for failing to use foreign donations.
With this, the government has invoked a rarely used provision of the Foreign Contribution (Regulation) Act, 2010 (FCRA)-the statute regulating such foreign currency inflows. This was triggered, sources feel, after the ministry checked the unused balances lying in the bank accounts of these organisations as on March 31, 2026. The decision to cancel FCRA registration comes after a wave of show-cause notices to NGOs around December 2025, and the ministry's subsequent rejection of the responses to the notices.
"The government has applied Section 14(1)(e) of the FCRA Act. It's seldom used. The cancellations have started over the past one week. We are experiencing cases where the home ministry is cancelling FCRA registration if a non-profit has not utilised foreign grants and donations that it had received three years ago. Our reply, justifying the non-utilisation of funds, stating that there were no suitable projects, was not accepted by the MHA. In a few cases we are planning to appeal on the grounds that there were not appropriate projects where the funds received could be utilised," said senior chartered accountant Gautam Shah who advises many non-profits and charitable trusts.
Registration of several entities cancelled
An organisation whose FCRA registration is cancelled can neither accept fresh foreign donations nor freely spend from the special accounts to hold foreign contributions. Five years ago, all NGOs were directed to open dedicated accounts with a particular New Delhi branch of the State Bank of India branch to receive money from overseas donors-a measure that enabled the ministry to approve and monitor inflows.
NGOs impacted by the state action will now find unused foreign currency donations 'frozen' in their respective bank accounts. And, if a new Bill, which is being fiercely debated, becomes a law, then the frozen funds would be handed over to a designated authority.
Till now, non-profits which allegedly backed religious conversions, or sponsored advocacy of causes that the state disapproves, or were bank-rolled by overseas donors closely linked to certain faith-based organisations have been at the receiving end of FCRA-an Emergency-era law to block disruptive foreign influences. How strongly the government acts against entities with idle dollar donations would be clearer in the coming days.
NEW BILL TO MAKE THINGS HARDER
"So far, most registrations were cancelled for failing to apply foreign donations which were received earlier. However, in cases where domestic funding was sufficient and foreign contributions weren't sought, or contributions were impacted because donors faced restrictions under the Act, a reasoned, fact-based response can prevent cancellation. The context behind alleged inactivity matters-many were not inactive by choice, and there are legitimate and defensible explanations. But silence or a weak response to a show-cause notice could lead to suspension, cancellation, and a three-year bar on fresh registration," said Isha Sekhri, a chartered accountant, who advises NGOs and local entities on cross-border transactions.
In the wake of the amendments proposed in the new Bill, it's widely felt the government would prefer a sterner stance on the use of funds in activities it perceives as sensitive as well as on non-utilisation of money. The Bill makes it unambiguously clear that during the period of suspension an organisation will need the government's permission before transferring or pledging any assets created out of foreign contributions.
"This creates a clear restriction on asset-level actions during suspension and limits operational autonomy. Organisations with ongoing projects or infrastructure assets may face constraints in restructuring, monetising, or otherwise managing such assets during this period," said a note by Sehar Sharma and Rahul Rishi working for the law firm Nishith Desai Associates (NDA).
The amendments, say Sharma and Joshi, signal a transition towards a more controlled and accountability driven regime, and organisations will have to recalibrate internal compliance systems, governance frameworks, and asset management practices.
