FM Nirmala Sitharaman Unveils Banking Law Changes

Finance Minister Nirmala Sitharaman remarked that the proposed revisions to banking regulations will strengthen India’s banking industry and protect investors.

Moving the bill for consideration and passage in the Lok Sabha, the Minister stated that 19 amendments are proposed to change the Reserve Bank of India Act of 1934, the Banking Regulation Act of 1949, the State Bank of India Act of 1955, the Banking Companies (Acquisition and Transfer of Undertakings) Act of 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act of 1980.

In her opening remarks, Sitharaman emphasised the broader benefits of the proposed changes.

“The proposed amendments will only strengthen governance in the Indian banking sector besides enhancing consumers and customer’s convenience with respect to nominations and protection of investors,” she said.

'The proposed amendments will only strengthen governance in Indian banking sector besides enhancing consumer's and customer's convenience with respect to nominations and protection of investors.'

Watch: Smt @nsitharaman's full opening remarks on 'The Banking Laws (Amendment)… pic.twitter.com/Xd2Q8FxNfQ

— Nirmala Sitharaman Office (@nsitharamanoffc) December 3, 2024

The bill aims to address key regulatory and operational challenges in the sector, with a focus on improving transparency and customer satisfaction.

Key Proposed Changes

• The bill proposes to allow a bank account holder to have up to four nominees in his/her account.
• The bill also seeks to transfer unclaimed dividends, shares, and interest or redemption of bonds to the Investor Education and Protection Fund (IEPF), allowing individuals to claim transfers or refunds from the fund, thus safeguarding investors’ interests.
• The proposed bill seeks to improve governance standards, provide consistency in reporting by banks to the Reserve Bank of India, ensure better protection for depositors and investors, improve audit quality in public sector banks, bring customer convenience in respect of nominations, and provide an increase in the tenure of the directors in co-operative banks.
• Another proposed change relates to redefining ‘substantial interest’ for directorships, which could increase to Rs 2 crore instead of the current limit of Rs 5 lakh, which was fixed almost six decades ago.
• The amendments in the Banking Regulations Act would apply only to cooperative banks or that part of the cooperatives which are operating as banks.
• The bill proposes to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years, so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.
• Once passed, the bill would allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
• The bill also seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors.
• It also seeks to redefine the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.

The announcement about amendmenting the Banking Regulation Act was made by the Finance Minister in the 2023-24 Budget speech.

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Source: NEWS 18