Banking law amendments to strengthen Indian banking system: FM

Finance Minister Nirmala Sitharaman today, said that the amendments to the banking laws will strengthen the country's banking system.

“Proposed amendments to the banking laws will only strengthen governance in the Indian banking sector besides enhancing customer convenience with respect to nomination and protection of investors," Sitharaman said in her opening remarks on the Banking Laws (Amendment), Bill 2024 in the Lok Sabha on Tuesday.

Some key amendments include allowing four nominees, and measures for consistency in reporting by banks to the RBI.

The FM informed the house that a total of nineteen amendments were proposed. “Amendments to the following Acts are proposed. A total of 19 amendments are being discussed here. In the Reserve Bank of India Act 1944, one amendment has been proposed. Twelve amendments have been proposed in the Banking Regulation Act, 1949. The SBI Act, 1955 has two amendments. Banking Companies and Acquisition Transfer of Undertakings Act, 1970 and Banking Companies and Acquisition and Transfer of Undertakings Act, 1978 have two amendments each,” Sitharaman said.

“The proposed bill seeks to improve the governance standards, provide consistency in reporting, ensure better protection for depositors and also for the investors, improve audit quality in the public sector bank and also to increase the tenure of the directors other than the chairperson and whole-time directors in co-operative banks,” Sitharaman added.

The finance minister highlighted seven key amendments out of the total 19 amendments proposed by the government.

“The first amendment in the Banking Regulation Act allows up to four nominees. This includes the provision of simultaneous and successive nominations, offering greater flexibility, and convenience to the depositor and their legal heirs, especially (for matters) concerning the deposits, articles in safe custody, and the safety lockers,” said Sitharaman. 

The second amendment to the Banking Regulation Act she highlighted pertained to the revision of reporting dates for the submission of statutory reports by banks to RBI, from every Friday to the last of the fortnight, month or quarter. “This change will ensure consistency in reporting,” said Sitharaman. 

Then the third of the amendments is for extending the tenure of the directors, excluding those of the Chairman and Wholetime directors from eight years to ten years in co-operative banks.

The fourth pertains to substantial interest. “The threshold of shareholding for substantial interest will be increased from five lakhs to ₹2 crore,” said Sitharaman.  The fifth amendment to sub-section III of section 16 of the Banking Regulation Act allows a director of a central co-operative bank to serve on the board of a state co-operative bank.