Compassion International is said to be shutting down its India operations after it was put under 'prior permission category' in May last year. When a donor organisation is put under this category, it is barred from funding any Indian NGO without the government's approval.
In December, the Home Ministry said it was unlikely to reconsider the decision, notwithstanding appeals by American authorities.
The reports of the shutdown came amid allegations that the charity was engaging in religious conversion.
"The Christian charity organisation would soon be forced to end its programme in India, through which it provides critical tuition, nutrition and medical services to more than 145,000 children," the letter said.
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"We want to be clear with you that we expect all American entities operating within India to respect India's laws, including Compassion. Having seen the important poverty alleviation work being done by CI, it is our sincere hope that this situation can be resolved quickly by your issuing a temporary reprieve," according to the letter dated March 21.
This has caused serious concern within the US Congress, the letter said.
"We are writing because we believe the Ministry of Home Affairs has issued an inter-bank circular preventing all commercial banks in India from processing CI's wire transfers without prior Ministry approval," the lawmakers said.
As a result, Compassion is unable to process the funds it needs to continue, and will be forced to close its sponsorship programmes on March 15, to the detriment of the hundreds of thousands of children Compassion serves in India, the letter said.
(Reopens FGN13)
Meanwhile, an apex body of Indian-American Christian
organisations rued that shutting down the NGO would deny thousands of underprivileged children an opportunity to join the national mainstream.
The aid provided by US-based Christian charity Compassion International helps break the cycle of poverty and indignity these children have experienced, said the Federation of Indian American Christian Organizations (FIACONA).
FIACONA said he the Indian Government's decision effectively denies these children a shot at what life could offer them.