New Delhi: Union Finance Minister Nirmala Sitharaman, on Friday introduced the Banking Laws (Amendment) Bill, 2024 in the Lok Sabha that proposes to bring several changes in banking regulations, including increasing the number of nominees allowed to be added in a bank account to four, redefining ‘substantial interest’ for directorship and increasing the tenure of cooperative bank directors.
Currently, only one person can be added as a nominee in a bank account.
According to sources, the new law will have provisions for simultaneous and successive nominations, offering greater flexibility and convenience for depositors and their legal heirs, especially concerning deposits, articles in safe custody, and safety lockers.
The Bill also proposes to enable the transfer of unclaimed dividends, shares, and interest or redemption of bonds to the Investor Education and Protection Fund (IEPF). It will allow individuals to claim transfers or refunds from the fund, thus safeguarding investors' interests.
The proposed amendments will affect major Acts that regulate the Indian banking system, including the Banking Regulation Act, 1949; the Reserve Bank of India Act, 1934; the State Bank of India Act, 1955 and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.
The union cabinet approved the Banking Laws (Amendment) Bill, 2024 last week.
The 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, and provide for an increase in the tenure of the directors, sources said.
The tenure of cooperative bank directors (other than chairperson and whole-time director) is proposed to be increased to 10 years from the current 8 years.
The Bill proposes to redefine the concept of 'substantial interest' for bank directorships, raising the threshold from the existing Rs 5 lakh to Rs 2 crore, reflecting an update to a limit that has been in place for nearly 60 years.
It seeks to provide banks more flexibility in determining the pay for statutory auditors. It also proposes changing the regulatory reporting dates for banks to the 15th and last day of each month, replacing the current practice of second and fourth Fridays.