Banking Laws (Amendment) Bill 2024: Overview

Key Objectives of the Bill

The Bill amends the following Acts:

1. Reserve Bank of India Act, 1934
2. Banking Regulation Act, 1949
3. State Bank of India Act, 1955
4. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
5. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980

The primary purpose of these amendments is to:

• Align statutory reporting requirements for banks.
• Introduce better practices for auditing public sector banks.
• Increase convenience for customers, particularly regarding nominations.
• Update certain provisions to reflect current economic realities and inflation.
• Protect the interests of depositors and investors.

Salient Features of the Bill:

1. Amendment to the Reserve Bank of India Act, 1934 (Section 42):
• The definition of "fortnight" is redefined as either the 1st to the 15th day of the month or the 16th to the last day of the month.
• Banks will now submit statutory reports on the last day of each fortnight instead of alternate Fridays.
2. Amendment to the Banking Regulation Act, 1949:
• Redefining “Substantial Interest” (Section 5): The threshold for a “substantial interest” in a bank is increased from ₹5 lakhs to ₹2 crore, reflecting inflation and the present economic scenario.
• Tenure of Directors in Co-operative Banks (Section 10A): Directors in co-operative banks (excluding the chairman and whole-time directors) will now have a tenure of up to 10 years, an increase from 8 years.
• Nomination Procedures (Section 45ZA, 45ZC, and 45ZE): Depositors can now nominate up to four persons, either successively or simultaneously, for bank accounts, articles in safe custody, and safety lockers.
3. Amendments to the State Bank of India Act, 1955:
• Unclaimed Dividends and Investor Protection (Section 38A): Unclaimed dividends and shares will be transferred to the Investor Education and Protection Fund (IEPF). Individuals can claim refunds or transfers from the IEPF as per rules under the Companies Act, 2013.
4. Amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and 1980:
• Similar provisions for unclaimed dividends, shares, and bonds have been introduced, aligning with the practices under the Companies Act, 2013.
5. Audit and Reporting Standards:
• Banks will now have more discretion over the remuneration of auditors. The power previously vested in the Reserve Bank of India to fix auditor remuneration in consultation with the Central Government has been transferred to the banks themselves.

Expected Impact:

The amendments will ensure:

• Better governance in co-operative and public sector banks.
• Enhanced protection of depositors' and investors' rights, especially concerning unclaimed funds.
• More consistency in the statutory reporting to the Reserve Bank of India.
• Greater convenience for customers regarding nominations and inheritance of bank accounts and lockers.

Conclusion:

The bill seeks to amend existing banking legislation to address emerging challenges, modernize governance structures, and enhance compliance with global financial standards.