The government on Friday introduced a Bill in Parliament to amend five banking laws to streamline services and governance standards, including allowing up to four nominees for depositors and raising the tenure of directors in cooperative banks from 8 years to 10 years.
The Banking Laws (Amendment) Bill, 2024 also seeks to provide consistency in reporting by banks to the RBI, ensure better protection for depositors and investors, improve audit quality in Public Sector Banks and enhance the threshold in the ‘substantial interest’ clause of directors in firms seeking loans.
Amendments to certain sections of the Banking Regulation Act 1949 seek to increase the option for nominees per bank account to four, from the existing one, among others.
For one locker, if it has been allotted to more than one customer, the holder can nominate a maximum of up to four nominees, up from two now.
Another proposed change relates to redefining ‘substantial interest’ which restricts loans to firms related to directors of banks. The threshold for a shareholding of a substantial interest will be increased from Rs 5 lakh to Rs 2 crore, reflecting the present value, as the same was last fixed in 1968. Currently, the Banking Regulation Act lays down the restrictions on loans and advances to the directors and the firms in which they hold substantial interest.
To align with the Constitution (97th Amendment) Act, 2011, it’s proposed to amend clause (i) of sub-section (2A) of section 10A of the Banking Regulation Act, extending the tenure of directors (excluding the chairman and whole-time directors) in cooperative banks from eight years to ten years.
Amendments to the Banking Regulation Act and the RBI Act seek to revise the reporting dates for the submission of statutory reports by banks to the RBI from reporting Friday to the last day of the fortnight, month, or quarter. This change will ensure consistency in reporting. This change will ensure consistency in reporting.
The Bill also seeks to amend the State Bank of India Act, 1955 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980 to enable the transfer of unclaimed dividends, shares, and interest or redemption of bonds to the Investor Education and Protection Fund (IEPF), allowing individuals to claim transfers or refunds from the fund, thus safeguarding investors’ interests. Also, unpaid or unclaimed dividend to be transferred to Unpaid Dividend account of the corresponding new bank.
Proposed amendment Section 16 of the Banking Regulation Act aimed at allowing a Director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.