Banking Laws (Amendment) Bill, 2024, that introduces reforms designed to modernise the banking sector and enhance customer convenience was passed by vote of motion yesterday in the Lok Sabha.
The key changes include allowing bank account holders to nominate up to four nominees and raising the threshold for substantial interest in bank directorships from Rs 5 lakh to Rs 2 crore, addressing a limit that has remained unchanged for nearly six decades.
The Bill, piloted by Finance Minister Nirmala Sitharaman, was passed through a voice vote.
Responding to the debate, Sitharaman explained that depositors would now have the flexibility to choose between successive or simultaneous nominations, while locker holders will have access only to successive nomination facilities. These measures are aimed at protecting depositors’ interests and reducing unclaimed funds in banks.
FM Sitharaman, emphasising the government and RBI’s focus on stability since 2014, said, “The intention is to keep our banks safe, stable and healthy. After 10 years, you are seeing the outcome of this cautious approach.”
The Bill also proposes governance reforms for cooperative banks, including:
- Extending the tenure of directors (excluding chairpersons and whole-time directors) in cooperative banks from 8 years to 10 years, aligning with the 97th Constitutional Amendment.
- Permitting a director of a Central Cooperative Bank to also serve on the board of a State Cooperative Bank, promoting cohesive management.
The proposed legislation offers greater autonomy to banks in determining the remuneration of statutory auditors, reflecting an emphasis on professional and financial governance.
Additionally, the Bill seeks to redefine reporting dates for regulatory compliance, moving from the second and fourth Fridays to the 15th and last day of every month, to ensure better regulatory alignment.
Sitharaman further added, “The proposed amendments will strengthen governance in the banking sector and enhance customer convenience with respect to nomination and protection of investors.”
With its passage, the Banking Laws (Amendment) Bill, 2024 is poised to bring far-reaching changes to India’s banking system, promoting stability, enhancing operational efficiency and aligning governance structures with contemporary needs. The Bill now awaits consideration in the Rajya Sabha.
editor@thefoundermedia.com
