NGO’s in core banking format

The home ministry has asked nearly six thousand NGOs to open their bank accounts having core banking facilities. The ministry said that this would allow the security agencies to have access in case of discrepancies.

Are the NGOs accounts transparent?

India has around 40,000 NGOs of which only 24,000 are active. Registration of more than 10,000 have been cancelled and nearly 1300 have been denied renewal. This move by the Home Minister started after it was detected that most of the NGOs have their bank accounts in cooperative banks or state government owned apex banks which do not have core banking facility.

The ministry has found out that many NGO’s bank accounts do not have core banking facility and few that were asked to produce details have failed to submit it. This allows most of the NGOs to resort to money laundering.

Why core banking facility?

The government wants all the NGOs registered under the Foreign Contribution Regulation Act to have their accounts in either private banks or nationalized banks, having core banking facilities. This law has been passed because the core banking facilities of all branches are interconnected. This would allow the ministry to have access in case of discrepancy especially for NGOs receiving foreign funding.

Core banking facilities would allow transparency and anti-financial crime. This would enable the government to hold records of the foreign contribution that has been made to the NGOs and ensure that the money is being utilized for a social cause and check money laundering.

Many NGOs have been reported being involved in money laundering. There were reports that after demonetization about 100 NGOs in Tamil Nadu and Puducherry had a large cash balance and the money doubled within few days and there was heavy cash deposits and withdrawals. There have been several instances of unscrupulous NGOs appropriating funds for their use and also leading to scams under the impression of performing public services. Years ago there was a case of Action Aid India writing forged letters to sponsors.

Hungary Foreign Agent Bill

The Hungary lawmakers have passed a bill according to which NGOs getting more than 7.2 million forints a year will have to register with the courts and identify themselves as being foreign-funded in websites and failure to do so would lead to fines or terminations. The aim of the bill is to achieve greater transparency in the civil sector. This would scrutinize the spending by the NGOs and check malpractices.

Similarly, Egypt is planning to require NGOs to seek approval from a government appointed committee before they can receive foreign funds.

Assessment

The initiative taken by the government to ensure NGOs have core banking facilities to keep a check on their foreign donation is quite effective. They are important to the society as they deal with social issues that are sometimes out of the government’s reach. NGOs play a vital role in providing basic amenities to people suffering from extreme poverty. They provide public services and developmental programs to the needy. Hence they are accountable to the poor for basic services. This plan of the government would protect the interest of the poor and ensure that they get the facilities that have been promised to them through the foreign donations. It would enable the government to have access to correct data of foreign investment and ensure that the NGOs spend it on needed projects like education, sanitation, health care, etc. It would also help keep a track of money exchanges and increase the efficiency and effectiveness of the NGO banks.