Finance Minister Introduces Landmark Banking Laws (Amendment) Bill 2024

Finance Minister Nirmala Sitharaman introduced the Banking Laws (Amendment) Bill 2024 in the Lok Sabha. The bill aims to enhance governance standards, improve reporting consistency, protect depositors, and amend multiple existing banking laws. It also includes provisions for increasing the number of bank account nominees and the tenure of cooperative bank directors.

Finance Minister Nirmala Sitharaman on Friday introduced the Banking Laws (Amendment) Bill 2024 in the Lok Sabha. The significant piece of legislation aims to amend the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.

The Bill sets out to improve governance standards, ensure consistency in bank reporting to the RBI, and provide better protections for depositors and investors. It aims to enhance audit quality in Public Sector Banks and increases the tenure of cooperative bank directors (excluding the chairperson and whole-time directors). Notably, it proposes raising the number of nominees in bank accounts from one to four.

According to the bill, lenders will be required to share credit information reports for regulatory compliance every fortnight instead of monthly. Sitharaman highlighted that the existing reporting system has limitations, including incomplete coverage and seasonal fluctuations, which affect data accuracy and consistency.

The new reporting rule will apply to all RBI-regulated institutions, including banks, cooperative banks, RRBs, and NBFCs. Additionally, the bill allows individuals to claim unclaimed dividends, shares, interest or bond redemptions transferred to the Investor Education Protection Fund (IEPF). It also extends the tenure of cooperative bank directors from eight to ten years and permits directors of central cooperative banks to serve on state cooperative bank boards.

Further amendments include raising the threshold for shareholding of substantial interest from Rs 5 lakh to Rs 2 crore. Sitharaman stated that the bill is designed to enhance the efficiency of cooperative banks, emphasizing the necessity of these amendments to the Banking Regulation Act.

In her address, Sitharaman responded to member queries by clarifying that the amendments and court rulings affirm the relationship between the Banking Regulation Act and cooperative banks, ensuring the proposed changes are essential and do not undermine cooperative principles. (ANI)

(With inputs from agencies.)