A standard questionnaire has been sent to Mumbai-based Islamic Research Foundation (IRF) after preliminary inquiry found the NGO run by Naik allegedly received about Rs 15 crore during a five-year period preceding 2012.
The IRF has been asked to furnish details of its bank accounts, including the designated FCRA account, and amount of foreign contributions received and utilised by it since inception, official sources said.
The preliminary probe has found that most of IRF's foreign funds came from the United Kingdom, Saudi Arabia and a few other Middle-East countries.
The Home Ministry probe will cover the allegations that foreign funding to IRF was used for political activities.
It will also look into allegation that the NGO's funds were used to induce people towards converting to Islam and "attract" youths towards terror, the sources said.
Meanwhile, sources said, legal opinion tendered recently to the Home Ministry has favoured declaring IRF an "unlawful association" under the Unlawful Activities (Prevention) Act.
The grounds for such a ban may include spreading hatred among religious communities and "forced conversions" by members.
Though IRF will be given a month to reply to the questionnaire, which seeks to know if NGOs are following FCRA rules, sources said, adding intelligence agencies have already pointed to a major violation by IRF as it is receiving and utilising funds for "religious and religion-linked" purposes despite being registered under "educational" purpose.
Sources said once the reply is received, a Home Ministry team will inspect the IRF's accounts. A show-cause notice may be issued if the inspection confirms FCRA violations.
The Home Ministry will move for cancellation of IRF's FCRA registration if the reply to the show-cause notice fails to satisfy it.
Any organisation declared as 'unlawful' is banned from recruiting members and faces closure of all its offices and interests across the country.