New Delhi: The changes proposed through the Banking Laws (Amendment) Bill, 2024, will strengthen governance in the sector and enhance customer convenience, Finance Minister Nirmala Sitharaman said on Tuesday.
Moving the bill for consideration and passing in the Lok Sabha, the Minister said a total of 19 amendments are being proposed to bring changes in 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.
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.
As the banking sector has evolved over the years and with a view to improving bank governance and investor protection, it has become necessary to make certain amendments to five Acts, according to a statement of Objects and Reasons of the Bill.
"The proposed amendments will strengthen governance in the banking sector and enhance customer convenience concerning nomination and protection of investors," Sitharaman said while moving the bill.
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.
With regard to cooperatives operating in the banking space, Sitharaman said 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, 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.
