The Reserve Bank of India has recently issued a circular dated 16th February 2023, announcing the introduction of a Foreign Contribution (Regulation) Act (FCRA) related transaction code in the NEFT and RTGS systems. This move is aimed at strengthening the transparency and accountability of transactions related to foreign contributions.
The FCRA regulates the receipt and utilization of foreign contributions by organizations in India. It is mandatory for any organization that wishes to receive foreign contributions to register under the FCRA. The introduction of this new transaction code will ensure that any transaction related to foreign contributions is easily identifiable and traceable.
The NEFT and RTGS systems are widely used for making electronic fund transfers in India. With the introduction of this new transaction code, any transaction related to foreign contributions will be identified by a unique code. This will make it easier for the authorities to track and monitor such transactions and ensure that they comply with the provisions of the FCRA.
The RBI’s circular also mandates that all banks must ensure that the new FCRA transaction code is incorporated in their systems before the end of March 2023. This will ensure that all transactions related to foreign contributions made after that date are compliant with the new regulations.
Currently, foreign contributions must be received only in the “FCRA account” of State Bank of India (SBI), New Delhi Main Branch (NDMB). The contributions to the FCRA account are received directly from foreign banks through SWIFT and from Indian intermediary banks through NEFT and RTGS systems. The donor details such as name, address, country of origin, amount, currency, and purpose of remittance are required to be captured in such transactions and SBI is required to report the same to Ministry of Home Affairs (MHA) on daily basis.
Moreover, the necessary changes have been introduced in NEFT and RTGS systems, the technical details are provided in the Annexure of the given Circular. Member banks are advised to incorporate necessary changes in their core banking / middleware solutions to capture the requisite details while forwarding the foreign donations through NEFT and RTGS systems to SBI. This Circular is applicable to the Chairman / Managing Director / Chief Executive Officer of member banks participating in NEFT and RTGS Systems and shall come into force from 15th March, 2023.
The introduction of this new transaction code is a significant step towards ensuring greater transparency and accountability in the receipt and utilization of foreign contributions in India. It will help in preventing the misuse of foreign funds and ensure that they are used for their intended purposes.
This move by the RBI is in line with the Indian government’s efforts to promote greater transparency and accountability in all financial transactions. It will also help in enhancing the country’s reputation as a responsible and trustworthy destination for foreign investment.
The introduction of the FCRA related transaction code in the NEFT and RTGS systems by the RBI is a welcome move. It will go a long way in ensuring greater transparency and accountability in transactions related to foreign contributions and prevent their misuse. The timely compliance by all banks is crucial to the effective implementation of this new regulation.
