FCRA

Foreign Contribution Regulation Act

The central government notified the Foreign Contribution Regulation Act, 2010 and it came into force from May, 1, 2011.

Salient Features of the Act:

(a)    Any association granted prior permission or registered with the Central Government under Section 6 or under the repealed FCRA, 1976, shall be deemed to have been granted prior permission or registered, as the case may be, under FCRA, 2010 and such registration shall be valid for a period of five years from the date on which the new Act has come into force.

(b)     While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent misutilisation of the foreign contribution received by the associations.

(c) Any organization of a political nature and any association or company engaged in the production and broadcast of audio or audio visual news or current affairs programme have been placed in the category prohibited to accept foreign contribution.

(d)    A new provision has been introduced to the effect that no person who receives foreign contribution as per provisions of this Act, shall transfer to other person unless that person is also authorized to receive foreign contribution as per rules made by the Central Government.

(e)     Another new provision has been made to the effect that foreign contribution shall be utilized for the purpose for which it has been received and such contribution can be used for administrative expenses up to 50 per cent of such contribution received in a financial year.

(f)     No funds other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources and manner and other particulars.

(g)     Provision has been made for inspection of accounts if the registered person or person to whom prior permission has been granted fails to furnish or the intimation given is not in accordance with law.

(h)     Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.

Self-Help Groups

                                  The RBI has allowed urban cooperative banks (UCBs) to give loans to selfhelp groups (SHGs). This decision by the RBI is definitely going to promote financial inclusion in the nation in addition to expand the scope of UCBs. If the reach of the UCBs is expanded, it will result in promoting financial inclusion. According to the latest guidelines of the RBI, lending to SHGs and JLGs (Joint Liability Groups) would be considered as normal business activity of the bank. UCBs will be required to frame a comprehensive policy on lending to SHGs and JLGs. The maximum amount of loan to SHGs should not exceed four times of the savings of the group. With regard to loans given to JLGs, the guidelines stated that the JLGs were not obliged to keep deposits with the bank and hence the amount of loan granted to them would be based on their credit needs and the bank’s assessment of the credit requirement.
 
Definition of Self-Help Group:

A Self-Help Group is a small voluntary association of poor people preferably from the same socio-economic back drop. The micro-credit given to them makes hem enterprising; it can be all women group, all-men group or even a mixed group. However, it has been the experience that women’s groups perform better in all the important activities of SHGs. In other words we can define the SHGs as a group of micro entrepreneurs with homogeneous social and economic background who voluntarily come together to save small amounts regularly and mutually agree to contribute to a common fund to meet their emergency needs.
 
Defining Joint Liability Groups:

A Joint Liability Group (JLG) is an informal group comprising preferably of 4 to 10 individuals coming together for the purposes of availing bank loan either singly or through the group mechanism against mutual guarantee. The JLG members are expected to engage in similar type of economic activities. The management of the JLG is to be kept simple with little or no financial administration within the group. JLGs can be formed primarily consisting of tenant farmers and small farmers cultivating land without possessing proper title of their land.