On August 9, 2024, the Government introduced the Banking Laws (Amendment) Bill, 2024 in the Lok Sabha, marking a significant overhaul of banking regulations aimed at modernizing and enhancing the operational framework of the sector. The Bill proposes several notable amendments to existing banking laws, including an increase in the number of nominees permitted per bank account, a redefinition of ‘substantial interest’ for directorships, and greater autonomy for banks regarding statutory auditor remuneration.
A key provision of the Bill is the proposed increase in the number of nominees per bank account from one to four. This change aims to provide greater flexibility and ease in estate planning and succession for account holders, ensuring that more individuals can be designated to manage the account in the event of the primary account holder’s death. This modification is expected to streamline the process of transferring account ownership and mitigate potential disputes among heirs.
Additionally, the Bill seeks to redefine the threshold for ‘substantial interest’ in the context of directorships. The current limit of ₹5 lakh, set nearly six decades ago, is proposed to be raised to ₹2 crore. This adjustment reflects the need to align regulatory definitions with contemporary financial realities and to ensure that the regulations governing directorships are appropriate for current economic conditions.
The Bill also includes provisions to grant banks increased flexibility in determining the remuneration for their statutory auditors. This measure is intended to enhance the efficiency of financial audits by allowing banks to negotiate remuneration that reflects the complexity and scope of the audit services provided. By affording banks greater discretion, the amendment aims to improve the overall quality of auditing and governance within the banking sector.
Further changes proposed in the Bill involve the adjustment of reporting dates for regulatory compliance. The Bill recommends shifting the reporting deadlines from the second and fourth Fridays of each month to the 15th and the last day of each month. This modification is designed to streamline compliance processes and align reporting schedules with standard accounting practices, thereby facilitating more accurate and timely regulatory oversight.
The Bill also encompasses amendments to several key statutes, including the Reserve Bank of India Act, 1934; the Banking Regulation Act, 1949; the State Bank of India Act, 1955; and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. These amendments aim to address contemporary issues in banking governance and investor protection, reflecting Finance Minister Nirmala Sitharaman’s commitment to modernizing the regulatory framework as outlined in her 2023-24 Budget speech.
Overall, the Banking Laws (Amendment) Bill, 2024 represents a comprehensive effort to enhance the operational efficiency, governance standards, and regulatory compliance of the banking sector, aligning it with current financial and operational realities.
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