Introduction
FCRA stands for the “Foreign Contribution Regulation Act.” It governs foreign development agency funding in India, and the Ministry of Home Affairs is the relevant ministry for enforcing this Act. This Act was first passed in 1976 to solve all security issues regarding funding from outside sources. Its primary goals are to reduce the risk of money laundering, limit the movement of black money into and out of the country, and eliminate funding for any illegal activity.
After the FCRA Act 2020 commenced, it declared SBI as the mandatory institution to open the FCRA bank accounts. SBI is recommended by people for opening a registration under FCRA. It is a designated bank by various governments that makes designated banks by the Ministry of Home Affairs trustable for handling foreign contributions under the FCRA It is a law enacted by the Government of India that governs receiving financial aid or contributions from foreign nations. The Indian government enacted FCRA on 31 March 1976, under the Ministry of Home Affairs.
Process of Opening an FCRA Account
Before the commencement of the FCRA Act 2020, various nationalized banks offered the opportunity to operate FCRA accounts.
But now as per the latest order, only State Bank of India has the power to operate these accounts.
To open an FCRA account you need to open a bank account first. Firstly, you have to get an Account Opening Form /AOF and then you have to fill it duly. It should be noted that this form requires obtaining a KYC. (Know Your Consumer) and for that, you have to provide certain documents such as ID proof, proof of residence and so on. You should keep these documents ready on a prior basis whenever you wish to open this account. After filling this form you have to submit it to keep the process going.
It is to be noted that this process is different for people who are existing consumers of SBI (State Bank of India). If you already have an account in SBI then you can simply visit your home branch and submit the forms and documents mentioned above there only. After such submission, the home branch or the managers of the other branch send the form to the central Branch i.e. New Delhi Main Branch (NDMB). The NDMB proceeds to verify the details mentioned in the form. After analyzing the form and the credentials thoroughly The NDMB approves the application and notifies the applicant within a time frame of three days. This streamlined procedure ensures compliance with regulations while facilitating the secure handling of contributions made by foreign entities.
Designated Banks for FCRA Account
As per section 17 of the Foreign Contribution Regulation Act, 2010 Foreign contributions must be received only in a bank account that is specified by the order of the FCRA registration or the prior permission order. As per the latest amendment named FCRA Ac020, now a beneficiary can operate an account under FCRA only in the State Bank of India.
Advantages of Opening an FCRA Account at SBI
1. Authenticity and Transparency
FCRA bank account ensures that the funds procured from different sources vis a vis foreign sources are obtained illegally SBI is an institution of government and thus ensures that such transactions are handled with compliance and transparency.
2. Enforcing Compliance and Regulations
After the amendment, FCRA Act 2the 020 came into the picture. This amendment introduced some major changes to ensure compliance in the industry by introducing a stricter regime for regulating accounts operating under FCRA. One of the essential features is to operate a bank account in the largest government bank of the country, i.e. SBI (State Bank of India).
3. Better Interest Rates
For people who are non-residents, SBI serves as a safe and lucrative option to deposit funds. It stays under the radar follows all government obligations and provides good interest rates. The cost of operating the account is also low.
How does the process of opening an FCRA account at SBI differ from that of other banks?
It is to be understood that the process of opening an FCRA bank account in the State Bank of India is different than the other banks because currently only SBI is allowed to register FCRA bank accounts. Therefore, it provides a centralized system for the operation of such accounts.
Conclusion
FCRA keeps a stringent check on the organizations that receive money from foreign aid. It ensures that the people who have such deeds are complying with all the due procedures and therefore, with such intent it enforced the amendment for FCRA accounts to register in the State Bank of India.
Failure to register can lead to suspension of license and freezing of existing bank account.
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