Banking Laws (Amendment) Bill 2024: What’s Changing?
Finance Minister Nirmala Sitharaman introduced the Banking Laws (Amendment) Bill, 2024, in the lower house of Parliament on Monday, aiming to reform India’s banking sector. According to Sitharaman, “The proposed changes in the Banking Laws (Amendment) Bill, 2024, will enhance governance and customer convenience in the sector.”
The Minister said a total of 19 amendments are being proposed to bring changes in the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
According to the Finance Minister, the proposed bill aims to improve governance standards, provide consistency in reporting by banks to the Reserve Bank of India, and ensure better protection for depositors and investors.
Proposal to increase nominations for bank accounts
The Banking Laws (Amendment) Bill proposes to increase the number of nominations allowed per bank account from the current limit of one to four. This change applies to both deposits and bank lockers.
Transfer of unclaimed assets
If the money in the account remains unpaid or unclaimed for seven years, it is transferred to the Investor Education and Protection Fund (IEPF). The Bill widens the ambit of the funds that can be transferred to IEPF. These include, the shares for which dividend has not been paid or claimed for seven consecutive years and any interest or redemption amount for bonds which is unclaimed for seven years. The bill allows individuals to claim these unclaimed funds from IEPF.
Access of Locker after holders’ death
The Banking Regulation Act allows single or joint deposit holders to appoint a nominee for their deposit. Such a nominee can also be appointed for items left in custody of a bank or for a locker hired from a bank. The nominee can access the deposit, articles, or locker in case of death of the person who nominated him. The Bill allows the appointment of up to four nominees for these purposes.
Substantial interest in a company
Under the Banking Regulation Act, substantial interest in a company refers to holding shares of over five lakh rupees or 10% of the paid-up capital of the company, whichever is less. This may be held by an individual, his spouse, or minor child, either individually or collectively. The threshold for substantial interest has been raised from Rs 5 lakh (a limit set in 1968) to Rs 2 crore.
Remuneration of auditors
At present, the remuneration paid to the auditors of banks is fixed by the RBI in consultation with the central government. The Bill empowers banks to decide the remuneration of their auditors.
Increasing the tenure of directors
The Banking Regulation Act prohibits the director of a bank (except its chairman or whole-time director) to hold office for more than eight years consecutively. The bill proposes to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 to 10 years. Once passed, the Bill would allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
Revised reporting deadlines for banks
The Bill also proposes new reporting deadlines for banks’ statutory submissions to the RBI. Instead of the current Friday deadline, reports will now be due on the last day of the fortnight, month, or quarter.
