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Banking Laws (Amendment) Bill 2024 Passed in Lok Sabha: What Are The Changes Brought In?
The Lok Sabha on 03 December 2024, passed the Banking Laws (Amendment) Bill 2024, aimed at improving banking governance and enhancing customer convenience. The Bill, introduced by Finance Minister Nirmala Sitharaman, was approved by a voice vote. This article details the changes brought in.
Author: Abhivad
Published: December 5, 2024
Presented as the first Bill of the Winter Session, the Banking Laws (Amendment) Bill, 2024, seeks to amend five key banking legislations to streamline compliance, strengthen regulatory mechanisms, and enhance investor protection. The amendments were originally announced during the Finance Minister's 2023-24 Budget speech and formally introduced in Lok Sabha on 09 August 2024.
The five Acts being amended include The Reserve Bank of India Act, 1934, The Banking Regulation Act, 1949, The State Bank of India Act, 1955, The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
Key Features
The Bill introduces 19 amendments focusing on several critical areas:
1) Nomination and Account Holder Rights: Bank customers can now assign up to four nominees for their accounts, simplifying the inheritance process. For articles in safe custody or lockers, only successive nominations are permitted.
2) Governance in Cooperative Banks: The tenure of directors in cooperative banks, excluding chairpersons and whole-time directors, has been extended from eight years to ten years. Additionally, directors of Central Cooperative Banks can now serve on State Cooperative Bank boards.
3) Redefining Substantial Interest: The threshold for “substantial interest” in directorships has been revised from ₹5 lakh to ₹2 crore, reflecting contemporary economic standards.
4) Auditor Remuneration: Banks now have greater autonomy in deciding the remuneration for statutory auditors.
5) Revised Reporting Timelines: Compliance dates for regulatory reporting have been updated to the 15th and last day of each month instead of alternate Fridays, ensuring consistency in reporting.
Parliamentary Debate and Opposition Views
During the debate, the Opposition raised concerns about potential implications of the amendments. Dravida Munnetra Kazhakam(DMK) MP Rani Srikumar criticised the rising fees for basic banking services and highlighted the vulnerability of senior citizens to cyber fraud. Nationalist Congress Party MP Supriya Sule proposed stringent measures against financial fraud, advocating for full compensation to victims. Congress MP Karti Chidambaram pointed out economic challenges, including the depreciation of the rupee and slowing growth, questioning the Bill’s timing in addressing broader financial concerns.
Implications for Banking Sector
Finance Minister Nirmala Sitharaman said that the amendments aim to enhance banking governance and improve customer convenience. The provisions, particularly on nomination flexibility, are expected to significantly reduce disputes over deposits and streamline succession planning for account holders. She also emphasised on the historic profit recorded by PSBs in FY24.
However, some experts caution that giving banks autonomy in deciding auditor remuneration could lead to potential conflicts of interest. The move is seen as a double-edged sword in balancing independence and accountability in audits.