The Home Ministry has also started the process for putting another NGO of Naik namely IRF Educational Trust in prior permission category, thus preventing it from receiving any foreign funds without getting nod from the government.
The move came after different investigations found Naik to be "involved" in utilising funds meant for the NGOs for alleged radicalisation of youths and "inspiring" them into terror activities, official sources said.
Interestingly, the IRF's registration under the Foreign Contribution Regulations Act was renewed in September inadvertently despite multiple probes against Naik, leading to suspension of a Joint Secretary and four other officials in the Home Ministry.
Government is also in the process of declaring IRF as an unlawful association under the Unlawful Activities Prevention Act and a nod from the Union Cabinet is awaited for it.
According to a draft note, which is based on the inputs from Maharashtra Police, Naik, who heads the IRF, has allegedly made many provocative speeches and engaged in terror propaganda.
Maharashtra Police has also registered criminal cases against Naik for his alleged involvement in radicalisation of youths and luring them into terror activities, a source said.
Naik also transferred IRF's foreign funds to Peace TV for making "objectionable" programmes. Most of the programmes, which were made in India, contained alleged hate speeches of Naik, who had reportedly "urged all Muslims to be terrorists" through Peace TV, sources have claimed.
Naik came under the scanner of the security agencies after Bangladeshi newspaper 'Daily Star' reported that one of the perpetrators of the July 1 terror attack in Dhaka, Rohan Imtiaz, ran propaganda on Facebook last year quoting Naik.
The Islamic orator is banned in the UK and Canada for his hate speech aimed against other religions. He is among 16 banned Islamic scholars in Malaysia.
He had been popular in Bangladesh through his Peace TV, although his preachings often demean other religions and even other Muslim sects. The Mumbai-based preacher has not returned to India ever since the controversy erupted.