In February 2023, the Reserve Bank of India (RBI) added a new code to the NEFT and RTGS systems. This code tracks and monitors foreign contributions from NGOs and associations in India. It improves transparency and compliance with the Foreign Contribution (Regulation) Act (FCRA)

Introduction of FCRA Transaction Code to RTGS and NEFT

The Reserve Bank of India (RBI) introduced a new transaction code on 16 February 2023. This code is for foreign contributions from registered NGOs and associations under the Foreign Contribution (Regulation) Act, 2010 (FCRA). The code was added to the NEFT and RTGS systems to make it easier to track and streamline these contributions. Know about FCRA Transaction Code to RTGS and NEFT.

What is FCRA?

The Foreign Contribution (Regulation) Act 2010 regulates the receipt and utilization of foreign contributions by NGOs and associations in India. It aims to ensure transparency and accountability in the use of foreign funds and prevent their misuse for illegal activities.

What is SWIFT?

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a global messaging network that banks and financial institutions use to send and receive financial transactions, including foreign contributions securely.

What is RTGS and NEFT System?

NEFT: National Electronic Funds Transfer (NEFT) is a nationwide payment system that facilitates the electronic transfer of funds between banks and financial institutions in India. It is a real-time system, meaning that the funds are transferred immediately after the transaction is confirmed.

RTGS: Real-Time Gross Settlement (RTGS) is another electronic funds transfer system in India. It is a high-value payment system used for large transactions of more than ₹2 lakhs. In the RTGS system, funds are settled on a gross basis, meaning that the transfer occurs immediately and is irrevocable.

Benefits and Features of Choosing RTGS:

• Faster settlement: Funds are transferred immediately in real-time.
• High-value transactions: Ideal for large transactions exceeding ₹2 lakhs.
• Safe and secure: Transactions are encrypted and highly secure.
• Wide range of banks: RTGS is available through most banks in India.

Necessary Information to Make an RTGS Transfer:

• Beneficiary’s name and account number
• Beneficiary bank name and branch IFSC code
• Amount to be transferred
• Transaction purpose
• FCRA code (either “FCRA” for RTGS or “41” for NEFT)

Modes in Which Funds Can Be Transferred in the RTGS System:

• Online banking
• Mobile banking
• Branch banking

FCRA-Related Changes Made to RTGS and NEFT Systems:

• FCRA transaction code: A new code has been introduced to identify foreign contribution transactions.
• Mandatory fields: Originating banks are required to provide specific information about the donor, recipient, and purpose of the contribution.
• Centralized monitoring: RBI will have centralized access to information on all FCRA-related transactions.

Updates on the Introduction of FCRA Transaction Code to RTGS and NEFT

Since its introduction in February 2023, the FCRA transaction code in the RTGS and NEFT systems has been operational and has successfully facilitated the tracking and monitoring of foreign contributions received by NGOs and associations in India. However, there have been some recent developments and updates worth noting:

Increased Data Reporting:

• The RBI has directed banks to report more information about FCRA transactions. This includes the purpose code, donor country code, and unique transaction reference number. Collecting this extra data will give us a clearer picture of how foreign funding comes in and how it is used.

Integration with FCRA Portal:

• The FCRA transaction code has been integrated with the FCRA online portal. This allows NGOs and associations to view and manage their data on foreign contributions in a centralized location.

Automated Reporting:

• Banks have been directed to implement automated reporting systems for FCRA transactions. This will streamline the process of reporting and reduce manual intervention.

Enhanced Monitoring:

• The RBI has strengthened its monitoring mechanisms for FCRA transactions. This includes regular data analysis and identification of suspicious activities.

Penalties for Non-Compliance:

• Banks and NGOs found violating the FCRA regulations, including non-compliance with reporting requirements, are liable for penalties and other administrative actions.

Challenges and Concerns:

• While the FCRA transaction code has improved transparency and compliance, some NGOs and associations have expressed concerns about the increased reporting burden.
• There are also concerns about the potential for data leaks and misuse of sensitive information.

Future Developments:

• The RBI constantly reviews and updates the FCRA regulations to address emerging challenges and ensure continued compliance.
• Integrating the FCRA system with other government databases can strengthen the monitoring process further.

Conclusion:

Introducing the FCRA transaction code in the RTGS and NEFT systems is a welcome change that will further enhance transparency and compliance with the FCRA regulations. It will also help to streamline the process of receiving and utilizing foreign contributions by NGOs and associations in India. Get in touch with Vakilsearch experts and know more.

FAQs About FCRA Transactions With RTGS and NEFT

What is an FCRA transaction code?

An FCRA transaction code is a special code used to identify foreign contribution transactions in the RTGS and NEFT systems. This code helps authorities track and monitor foreign funds received by NGOs and associations in India, ensuring transparency and compliance with the Foreign Contribution (Regulation) Act (FCRA).

What are the benefits of using an FCRA transaction code?

Enhanced transparency: Allows authorities to track the flow of foreign funds and ensure their intended use. Improved compliance: Helps NGOs and associations comply with FCRA regulations and avoid penalties. Streamlined process: Simplifies the process of receiving and utilizing foreign contributions.

What information do I need to provide for an FCRA transaction?

Beneficiary's name and account number Beneficiary bank name and branch IFSC code Amount to be transferred Transaction purpose FCRA code (FCRA for RTGS or 41 for NEFT)

What other services can I avail of along with an FCRA transaction?

Both RTGS and NEFT offer various services beyond just FCRA transactions. These include: Recurring transfers Bulk transfers Bill payments Account-to-account transfers High-value transactions Same-day settlement Interbank transactions Foreign inward remittances Internet banking and mobile banking SMS alerts Fund tracking Customer support

Who can use an FCRA transaction code?

Only registered NGOs and associations under the FCRA can use the FCRA transaction code.

What are the recent updates on FCRA transaction codes?

Recent updates include increased data reporting, integration with the FCRA portal, automated reporting, enhanced monitoring, and stricter penalties for non-compliance.

What are the challenges and concerns surrounding FCRA transaction codes?

Some concerns include increased reporting burden for NGOs, potential for data leaks, and misuse of sensitive information.

What are the future developments for FCRA transaction codes?

Future developments may include integration with other government databases and continuous improvements to the regulations.

Where can I find more information about FCRA transactions?

You can find more information on the websites of the RBI, FCRA portal, and your bank.