The Reserve Bank of India (“RBI”) issued circular on February 16, 2023 (“Circular”) mandating inclusion of certain additional technical codes in the NEFT and RTGS core banking / middleware solution systems of originating banks from where foreign contribution is remitted and disclosure of certain information of the donor. Instructions were issued by RBI under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2008. Circular mandates disclosure of details such as name of the donor, his address, country, amount of remittance and purpose of remittance by originating banks. The details of technical codes and the mode of disclosure is provided in Annex to this article.

The mode and manner of foreign contribution by foreign source to a person is governed by Foreign Contribution (Regulation) Act, 2010 (“Act”). The Act was promulgated by repealing Foreign Contribution Regulation Act, 1976 and incorporating stringent provisions to prevent misuse of foreign contribution. The Act introduced new provisions prohibiting a person receiving foreign contribution to remit such foreign contribution received by him to any other person who is not authorised to receive foreign contribution, thus mandating utilisation of the foreign contribution so received only for the purpose declared and receiving foreign contribution in only a specified bank account. Further, the Act provides that the certificate of registration shall be valid for the specific purpose and amount so authorised and for a period of five years, unlike the earlier regime.

As per the Act, foreign contributions can be made to any person. A person is defined under Section 2(m) of the Act as an individual or a Hindu undivided family or an association or a company registered under Section 8 of the Companies Act, 2013 [Section 2(m) of the Act]. A foreign source is defined as government of any foreign country or its agency, any international agency (excluding certain notified agencies), a foreign company, a corporation, a multi-national corporation, a trade union in any foreign country or territory, a foreign trust or foundation, society, club or other association of individuals formed or registered outside India or a citizen of a foreign country [Section 2(j) of the Act].

Foreign contribution is broadly defined as donation, delivery, or transfer made by any foreign source of any article (not including a gift, not having market value more than the prescribed amount), any currency (whether Indian or foreign), and any security as defined under Section 2(h) of the Securities Contracts (Regulation) Act, 1956, including foreign security as defined under Section 2(o) of the Foreign Exchange Management Act, 1999 [Section 2(h) of the Act]. Donation from a person of Indian origin who acquired foreign citizenship is also treated as foreign contribution.        

There are certain prohibited classes of persons such as election candidates, correspondents, editors or owners of a registered newspapers, public servant, etc., who cannot receive foreign contributions under Section 3 of the Act. However, Section 3 of the Act does not apply when any such person receives foreign contribution by way of salary, wages or remuneration received inter alia in the ordinary course of business, or by way of payment in the normal course of international trade or commerce, or from a relative, etc. [Section 4 of the Act].

Section 11(2) of the Act provides for greater regulatory control over persons having a definite cultural, economic, educational, religious or social program receiving and utilizing foreign contribution in their formative stage. Such persons are granted prior permission to receive foreign contribution from specified foreign sources and utilise the foreign contribution only for the declared purpose.

Amendment to Section 17 of the Act mandates every person registered or granted permission to receive a foreign contribution to receive such foreign contribution in an account designated as “FCRA Account” in such notified branch of State Bank of India (“SBI”) [New Delhi Main Branch of the State Bank of India has been notified as the branch for receiving foreign contribution.]. Section 17 (2) of the Act requires the notified SBI branch and any other scheduled bank [In case another bank account is operated for keeping or utilizing the foreign contribution in terms of proviso to Section 17 of the Act.] to inter alia furnish information such as amount, source and manner in which foreign remittance was received.          

Thus, the Circular appears to fulfill the mandate under Section 17(2) of the Act by directing banks receiving foreign contribution to disclose information on foreign contribution received and is thus a welcome step in ensuring that foreign contribution is not utilized for any unlawful activities.

A) FCRA Transaction Code in NEFT and RTGS Systems:

Originating banks to select the following fields of NEFT / RTGS systems while remitting foreign donations to the FCRA account at SBI:

B) Format for providing Donor Details in 7495 and RmtInf fields of NEFT and RTGS Systems:

Originating banks are required to pass on donor details in the following formats of ‘Sender to remitter' information of NEFT and ‘RmtInf’ tag of RTGS:

Akshat Pande is the Corporate Practice Head and Partner at Fox & Mandal. Sadhak Sharma is an Associate at the Firm.