The Government has introduced a bill seeking amendments in the banking laws in the Lok Sabha. The Banking Laws (Amendment) Bill, 2024, which aims to make significant changes to important banking regulations was put up by the finance minister Nirmala Sitharaman. During her budget speech 2023-24, the finance minister had drawn the attention of the house toward the need for reforms in the banking sector to strengthen governance and safeguard the interests of investors.
One of the most significant and people-friendly proposals in the new bill is to increase the number of nominees in a bank account. Presently banks allow one or two nominees. The new amendment seeks to increase the limit up to four. The welcome move will provide more flexibility and choice to the customers. Not only that, the amendment proposes successive nominations where a customer would be able to list several nominees in a specific order. This will help second and successive nominees to claim the funds if the primary nominee is unable to do so. The amendment will surely simplify the process of nominating and safeguard the customers’ right by providing better convenience to depositors.
Other amendments proposed include moving unclaimed dividends, shares, and bond payments to the Investor Education and Protection Fund (IEPF). It will help customers to claim refunds. The bill, to the delight of chartered accountants, proposes to give banks more flexibility in setting the remuneration for statutory auditors.
An another amendment concerning the governance of banks, the government proposes changes to sections 18, 24, 25, and 56 of the Banking Regulation Act and section 42 of the RBI Act. The amendment seeks to revise the reporting dates for the submission of statutory reports by banks to the RBI from first and fourth Friday to the 15th and last day of every month. The rationale put forward by the finance minister is aiming for the consistency of reporting, improving accuracy, and attaining effectiveness of the reporting of data.
The bill also proposes several important and far-reaching changes to the cooperative banking sector. The most important among them is the proposed amendment to the clause (i) of sub-section (2A) of section 10A of the Banking Regulation Act. With this amendment. government wants to extend the tenure of directors in cooperative banks from 8 years to 10 years. However, this amendment shall not cover the chairman and whole-time directors. At the same time, the bill proposes to redefine “substantial interest” by way of shareholding. The threshold of the shareholding was last fixed in 1968 at Rs.5 lakh. The amendment proposes to increase the amount to Rs. 2 crore, in sync with the present value of money. Interestingly, a proposed amendment wants to allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
The amendment proposals, when converted into law, will affect 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.
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