Long Inactivity and Loss of FCRA
References:
- NGOs lose foreign donation nod for failing to use funds, Economic Times, 20-Apr-26
- Sec. 14(1)(e) of FCRA 2010
One of the reasons an NGO can lose its FCRA registration is for being inactive for two years:
14. CANCELLATION OF CERTIFICATE. (1) The Central Government may, if it is satisfied after making such inquiry as it may deem fit, by an order, cancel the certificate if —… (e) if the holder of the certificate has not been engaged in any reasonable activity in its chosen field for the benefit of the society for two consecutive years or has become defunct. (2) No order of cancellation of certificate under this section shall be made unless the person concerned has been given a reasonable opportunity of being heard….
Some NGOs have reportedly lost their FCRA registration for precisely this reason. They first received a show-cause notice around 3–4 months ago (mandatory under sec. 14(2)). Some replied citing lack of suitable project, or operational reasons for delay of project, such as local authority permission, etc. Their FCRA registration was still cancelled.
Now they cannot use FCRA funds in their bank or apply for fresh registration or even prior permission for three years.
What Can You Do to Avoid This Fate?
1. Increase Utilisation
Try and utilise at least 50–75% of the available funds each year.
2. Clear Presentation
Present corpus/endowment funds separately in audited financials.
- Show these as utilised in FC-4 when you make the required investments.
- Present Corpus/Endowment as a distinct liability.
- Show corpus/endowment investments on assets side separately.
3. Avoid Accumulation
Avoid asking donors for more funds than you need. If a project is contingent on a permission, wait for the permission before asking donor to release the funds.
4. Cogent Response
If you get a show-cause notice, don't give a vague or generic response.
5. Appeal
If your FCRA is cancelled unreasonably, without application of mind, file an appeal in the High Court.