The Banking Laws (Amendment) Bill, 2024, introduced by Finance Minister Nirmala Sitharaman, aims to modernize governance frameworks, enhance customer convenience, and strengthen regulatory compliance in India's banking sector. Passed by the Lok Sabha, the Bill introduces 19 amendments across five key legislations, including the Reserve Bank of India Act, 1934, and the Banking Regulation Act, 1949. Below are the salient features and their implications:
Key Amendments and Features
Enhanced Nomination Facilities:
Bank account holders can now nominate up to four persons for deposits, safe custody, and lockers, ensuring smooth and unambiguous inheritance.
Simultaneous or successive nomination options are provided, though locker nominations are limited to successive ones. This change reduces complications for legal heirs and avoids unclaimed deposits.
Governance Reforms:
The definition of "substantial interest" under the Banking Regulation Act has been updated, raising the threshold for shareholding from ₹5 lakh (set in 1968) to ₹2 crore, reflecting current economic realities.
The tenure for directors (excluding chairpersons and whole-time directors) in cooperative banks is extended from 8 to 10 years, aligning with the Constitution (Ninety-Seventh Amendment) Act, 2011.
Directors of central cooperative banks are now eligible to serve on the boards of state cooperative banks, fostering synergy across governance structures.
Customer and Investor Protection:
Amendments include provisions for transferring unclaimed dividends, shares, and bond interests to the Investor Education and Protection Fund (IEPF), with mechanisms for refunds.
Strengthened measures ensure better protection of depositors' interests.
Auditing and Reporting Enhancements:
Banks gain discretion over statutory auditors’ remuneration, improving financial and operational independence.
Reporting deadlines for regulatory compliance are standardized to the 15th and last day of every month, replacing the earlier requirement of second and fourth Fridays.
Banking Stability and Resilience:
Reflecting on the stability of Indian banks since 2014, the Finance Minister emphasized the cautious regulatory environment created by the government and the RBI, highlighting its success in maintaining robust governance amid global banking uncertainties.
Additional Amendments:
Provisions in other laws aim to streamline the transfer and refund of financial instruments under the IEPF.
Public sector banks now have greater autonomy in deciding auditor payments, fostering professionalism.
Implications of the Bill
The amendments mark a significant stride toward addressing outdated provisions, strengthening governance, and aligning the banking sector with contemporary economic needs. The Bill's focus on depositor-friendly measures, regulatory modernization, and professional banking practices is expected to enhance customer convenience, ensure financial stability, and promote efficient banking operations.
This reformative step highlights the government's commitment to fostering a safe, stable, and transparent banking ecosystem in India.
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