Banking Law Amendments To Bolster Governance, Investor Protection: FM Nirmala Sitharaman

Last Updated: December 03, 2024, 15:58 IST

The costs intends to attend to regulative and functional obstacles, with a concentrate on enhancing openness and client fulfillment.

Finance Minister Nirmala Sitharaman mentioned that the suggested modifications to financial legislations would certainly strengthen India’s financial field and protect capitalist passions.

Moving the costs for factor to consider and coming on the Lok Sabha, the Minister stated a total amount of 19 modifications are being suggested to bring modifications in 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.

In her opening statements, Sitharaman stressed the more comprehensive advantages of the suggested modifications.

“The proposed amendments will only strengthen governance in the Indian banking sector besides enhancing consumers and customer’ s benefit relative to elections and security of financiers,” she said.

The bill aims to address key regulatory and operational challenges in the sector, with a focus on improving transparency and customer satisfaction.

Key Proposed Changes

• The bill proposes to allow a bank account holder to have up to four nominees in his/her account.
• The bill also seeks to transfer 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.
• The proposed 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, bring customer convenience in respect of nominations and provide an increase in the tenure of the directors in co-operative banks.
• Another proposed change relates to redefining ‘substantial interest’ for directorships, which could increase to Rs 2 crore instead of the current limit of Rs 5 lakh, which was fixed almost six decades ago.
• The amendments in the Banking Regulations Act would apply only to cooperative banks or that part of the cooperatives which are operating as banks.
• The bill proposes to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years, so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.
• Once passed, the bill would allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
• The bill also seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors.
• It also seeks to redefine the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.

The announcement about amendmenting the Banking Regulation Act was made by the Finance Minister in the 2023-24 Budget speech.

(With PTI inputs)