Financial institutions, Banks, or intermediaries, are required to ensure that their non-profit organization (NPO) customers have been verified on NITI Aayog’s DARPAN portal. This directive is part of broader efforts to enhance transparency and compliance within the financial sector, particularly concerning organizations that could be vulnerable to misuse for money laundering activities.

 

The NGO-DARPAN is a platform that provides space for an interface between VOs/NGOs and key Government Ministries/Departments/Government Bodies, to start with. Later it is proposed to cover all Central Ministries/Departments/Government Bodies. It is a free facility offered by the NITI Aayog in association with the National Informatics Centre to bring about greater partnership between the government & voluntary sector and foster better transparency, efficiency, and accountability. DARPAN has been developed by the National Informatics Centre (NIC), the premier ICT Organisation of the Government of India under the aegis of the Ministry of Electronics & Information Technology (MeitY), Government of India.

 

Overview of Section 46A of RBI’s KYC Directions, 2016

Objective:

To prevent and penalize money laundering by increasing transparency in financial transactions involving non-profit organizations (NPOs). This is consistent with the guidelines of the Financial Action Task Force (FATF).

 

Scope:

Applicable to all NGOs/NPOs established for ‘charitable purposes’ as defined under section 2(15) of the Income Tax Act, 1961, that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a Company registered under the section 8 of the Companies Act, 2013. The requirement is not limited to organizations registered under the Foreign Contribution Regulation Act (FCRA) or those receiving government grants.

Requirement for Banks and Financial Institutions (REs):

Ensure that details of customers who are NPOs are registered on the DARPAN Portal of NITI Aayog. If such customers are not already registered, the financial institution should facilitate or ensure the registration of these details on the DARPAN Portal.

Maintain records of such registration for five years after the end of the business relationship or the closure of the account, whichever occurs later.

 

Registration on the DARPAN Portal

Provides a centralized database for quick access to pertinent information on NGOs/NPOs. The portal seeks to improve accountability and transparency in the activities of these organizations.

 

Impact

This mandate assigns a major obligation to banks and financial institutions to check and register their NPO clients on the DARPAN Portal. It is a step towards preventing the abuse of the financial system by companies under the guise of charitable activities for money laundering or other illicit purposes.

In conclusion, Section 46A of the RBI’s KYC Directions, 2016, is an important step towards enhancing the regulatory framework for financial transactions involving non-profit organizations

By enforcing the registration of NPOs on the DARPAN Portal, the Reserve Bank of India aims to promote a more transparent and accountable financial environment.