Banking Laws Amendment Bill 2024 — Explained

Lok Sabha passed Banking Laws Amendment Bill 2024. The measure intends to improve banking governance, RBI reporting, and depositor and investor safety. Learn more on the acts that get amended and the key changes such as number of nominees for each bank account and locker etc.

This document covers

Background
Applicability
Key Changes

1. Background

The Indian banking system has changed over decades. The Indian banking system is well-established and vital to its prosperity. Banking meets the economy's credit and banking needs.

The Indian banking industry has 137 scheduled commercial banks. Additionally, 9516 NBFC and 5 All India Financial Institutions lend to specialized sectors.

Lok Sabha passed Banking Laws Amendment Bill 2024. The bill strengthens banking governance, improves RBI reporting, and protects depositors and investors.

2. Applicability

The following Acts will get amended by Banking laws Amendment Bill 2024

Reserve Bank of India Act, 1934
Banking Regulation Act, 1949
State Bank of India Act, 1955
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

3. Key Changes

	Changes to Bank Nominee: Bank accounts can have up to 4 nominees. The nominees can be added either "successively" or "simultaneously". Successive Nomination: If a nomination is submitted for more than one person and up to four people, it is only effective in favor of one of them in order of priority. In other words, the second nominee can only withdraw funds if the first nominee is not available. If the second nominee is not present, the legitimate heir will be named as the third. Then the fourth. Simultaneous nomination allows all four nominees to grab money. Everyone has equal rights, regardless of order of nomination. Simultaneous Nomination: If a nomination is made in favour of more than one person and up to four people, the following rules apply: the nomination must be made in respect of the entire deposit. The nomination should specify the proportion of the deposit in favour of each nominee. If any nominee dies before receiving the deposit from the bank, it will be ineffective and considered as if no nomination was made in respect of that part of the deposit. Nominee Vs Legal Heir A NOMINEE is a person who is trusted by the account holder to manage assets, such as a bank account or fixed deposit, until they can be legally transferred to the legal heirs. A LEGAL HEIR is legally entitled to inherit the assets of a deceased person. Legal heirs have legal ownership rights over the assets. Nominations don't override the legal rights of the legal heirs but streamline the process of transferring an asset. They only facilitate the distribution of the asset, post which how a nominee transfers such asset to the legal heir is a different subject.
	Nomination for Bank Lockers: The proposed amendment to the banking regulations in 2024 aims to increase the allowable number of nominees for Bank Lockers to four. Nevertheless, in the context of bank lockers, only consecutive nominations are allowed. The practice of simultaneous nomination is not permitted regarding bank lockers. know more on Bank Lockers (Safe Deposit Box) - a Complete Guide
	Revision of reporting dates: The Banking Laws Amendment Bill of 2024 proposes to revise the deadline for the submission of statutory reports. The reporting will change from every Friday to the last day of the fortnight.
	Substantial Interest for Directorships: The Banking Laws Amendment Bill of 2024 proposes to elevate the threshold for the definition of substantial interest (holding shares) from Rs. 5 lakhs to Rs. 2 crores.
	Increase in tenure of directors of Co-operative Banks: The Banking Laws Amendment Bill of 2024 proposes to extend the tenure of directors, excluding the chairman and whole-time directors, in co-operative banks from eight (8) years to ten (10) years.
	Remuneration of Auditors: At present, the Reserve Bank of India is determining the remuneration for auditors. The Banking Laws Amendment Bill 2024 proposes that banks shall have the autonomy to determine the remuneration of their auditors.
	Handling of Unclaimed/Unpaid Funds: The Banking Laws Amendment Bill 2024 stipulates those unclaimed dividends, shares, interest, or the redemption of bonds shall be allocated to the Investor Education and Protection Fund (IEPF). Any individual whose shares or unclaimed/unpaid funds have been transferred to the Investor Education and Protection Fund (IEPF) is entitled to request the transfer or refund of such assets.