What changes with new Banking Laws?

The Bill is a one-shot attempt to amend several key banking laws in the country, including the Reserve Bank of India Act 1934, the Banking Regulation Act 1949, and the State Bank of India Act 1955.

Some key changes as proposed are as follows:

• The bill plans to raise the number of nominees allowed per bank account from one to four which will provide account holders with greater flexibility and choice.

• Revising the definition of 'substantial interest' for directorships, the bill has proposed to increase the limit that has remained unchanged for 60 years, from ₹5 lakh to ₹2 crore.

• To safeguard interests of the investors, the bill plans to transfer unclaimed dividends, shares, and bond payments to the Investor Education and Protection Fund (IEPF), which will allow individuals to claim these funds or seek refunds.

• Additionally, the government intends to standardise reporting dates used by the banks used for regulatory purposes. With the bill, the reporting dates which are currently the second and the fourth Fridays of each month will become the 15th and the last day of every month.

• For banks to have greater freedom in their fiscal matters, the bill proposes to permit banks in deciding the remuneration for statutory auditors.

• If passed, the bill will extend the tenure of cooperative bank directors (excluding the chairman and whole-time director) from 8 years to 10 years. The bill would also allow a Central Cooperative Bank's director to serve on the State Cooperative Bank's board.

This Bill's introduction follows Sitharaman's Budget 2024 speech from July 23, where she stressed on reforming the banking sector for simplifying governance and protecting investors' interests.

The Bill was approved last week by the Union Cabinet. Following its introduction in the lower house, members of the opposition argued that the Bill encroached on the legislative authority of the states and that amending five laws with a single bill was unnecessary. In response, the Finance Minister stated that the sheer multitude of laws necessitates a unified law from the Centre.