Finance Minister Nirmala Sitharaman presented the Banking Laws Amendment Bill 2024 in the Lok Sabha, aiming to overhaul several key banking regulations, on Friday.
The bill proposes amendments to the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, State Bank of India Act, 1955, Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
Key objectives of the bill include enhancing governance standards, standardising reporting practices by banks to the Reserve Bank of India (RBI), and improving depositors’ and investors’ protection. It also seeks to boost audit quality in Public Sector Banks and extend the tenure of directors (excluding chairpersons and whole-time directors) in cooperative banks.
Significant amendments proposed include increasing the number of nominees allowed in a bank account from one to four, particularly for deposits, safe custody items, and safety lockers. The bill also mandates that lenders provide credit information reports for regulatory compliance every fortnight, rather than monthly, due to limitations of the current reporting system.
Finance Minister Sitharaman highlighted the shortcomings of the existing reporting framework, which affects data accuracy and effectiveness.
She explained, “The current reporting system has several limitations, including incomplete monthly data coverage, seasonal banking activity fluctuations leading to inconsistent reporting, and the need for adjustments every eleventh year which introduces complications.”
The fortnightly reporting requirement will apply to all institutions regulated by the RBI, including banks, cooperative banks, Regional Rural Banks or RRBs, and Non-Banking Financial Companies or NBFCs. Additionally, the bill allows individuals to reclaim unclaimed dividends, shares, interest, or bond redemptions transferred to the Investor Education Protection Fund-IEPF.
Other proposed changes include extending the tenure of cooperative bank directors from 8 to 10 years and permitting directors of central cooperative banks to serve on state cooperative bank boards. The bill also raises the threshold for substantial shareholding from Rs 5 lakh to Rs 2 crore.
Sitharaman asserted the amendments are designed to enhance the efficiency of cooperative banks, stating, “The various amendments to the Banking Regulation Act concerning cooperative banks are numerous and significant.” She reassured that the amendments aim to align the relationship between the Banking Regulation Act and cooperative banks, ensuring no detriment to cooperatives.
In summary, the bill represents a comprehensive effort to modernise and streamline banking regulations to improve efficiency and governance across the sector.
