Russia's lower house of parliament has approved a controversial bill that brands foreign-funded NGOs as "foreign agents".

Activists said the Kremlin, Russia’s seat of government, was using the law passed on Friday to rein in critics.

The legislation, which has been criticised by the European Union and the US, was passed by the State Duma with 374 votes in favour, three against and one abstention in the third and final reading - just minutes after the second reading also sailed through.

NGOs failing to abide by the law would be punishable by hefty fines or jail time. 

The deputies also passed another controversial law making libel or slander a criminal offence punishable by a fine of $152,000, voting 238 in favour to 91 against. 

Both bills are almost certain to be approved by the upper house before being signed into law by Vladimir Putin, Russia’s president who last year accused the US state department of funding protests against him. 

Analysts said the bill will set the stage for a crackdown on the opposition.

Bill ridiculed

Critics have argued that the term "foreign agent" implies spying for a foreign government and would harm the image of many human rights and environmental groups working in Russia. 

The final two readings of the bill were rushed through the largely pro-Putin chamber on the final day of its spring-summer session, despite protests from both Russian and Western rights groups. 

Opposition deputy Ilya Ponomarev of the Just Russia party ridiculed the bill, saying it had made him a foreign agent because of his efforts to help the victims of last weekend's devastating floods in southern Russia. 

"I have for sure become a foreign agent as I gathered donations for Krymsk and 1,000 people sent money from abroad," he told the Duma. 

"The law is one step towards the degradation of civil society and aimed at setting citizens against each other. Adopting this law is not right, it is aimed at creating a schism in society."

Putin on Tuesday voiced support for both bills, promising more money to the NGOs from the state budget and saying that libel should not incur jail time, as the legislators had initially proposed. 

Opposition deputies say that the libel bill, which was introduced just days ago, effectively "outlaws dissent" in the country. 

It especially singles out libel against judges, prosecutors and investigators. 

"It will be used to prosecute people who are not happy with the government," said senior Communist MP and former prosecutor Yury Sinelschikov, complaining of the lack of time to properly study the bill.