The Hindu Business Line : Go by rule book while crediting funds from abroad, RBI tells banks

THE Reserve Bank of India has advised banks to strictly adhere to the guidelines under the Foreign Contribution (Regulation) Act while crediting funds from abroad by way of contributions to their account holders.

The RBI has issued a master circular regarding this to banks following concerns expressed by the Government that banks have not been scrupulously adhering to these guidelines.

Under the Foreign Contribution Regulations Act, 1976, (FCRA), bank are allowed to accept foreign contributions only through the designated bank branch, the name of which has been specified in the application submitted to the Government.

The RBI circular said some bank branches have not been strictly following the provisions of the FCRA and foreign contributions were received by entities without obtaining prior permission of the Government.

The circular also listed some other irregularities observed in this regard. For instance, some associations operate more than one account, either in the same branch or in different branches for carrying on transactions of foreign contributions. Some unregistered associations were allowed to credit cheques or drafts representing foreign contribution and withdrawal, without prior permission of the Central Government.

Several associations that were prohibited permission by the Government were allowed credit and withdrawal of foreign contributions by banks.

The circular said that several banks, which have foreign exchange branches, are not following the rule which makes it mandatory for them to send a half-yearly statement to the Government, giving details of the foreign contributions received by associations and organisations.

This implies that some part of the foreign contributions received by banking channels is getting diverted to fund unlawful activities, the circular said.

The circular also warned banks to keep a watch on the accounts of such organisations that have been declared as being political in nature, but not being a political party and report any discrepancy to the Home Ministry.

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