New Delhi [India], December 3 : Finance Minister Nirmala Sitharaman said on Tuesday that the Banking Laws (Amendment) Bill will strengthen governance in Indian banking sector besides enhancing consumer's and customer's convenience with respect to nominations and protection of investors.
The Minister moved the Banking Laws (Amendment) Bill, 2024, for consideration and passing in Lok Sabha,
The bill seeks to improve governance standards and provide consistency in reporting by banks to the Reserve Bank of India. The amendments will also ensure better protection for depositors and investors and will also improve the quality of services in the public sector banks.
Once the bill is passed, the Banking Regulation Act will allow up to four nominees for depositors. This includes provisions for simultaneous and successive nominations, offering greater flexibility and convenience for depositors and their legal heirs, especially concerning deposits, articles, safe custody and safety lockers.
The proposed amendments seek to increase the tenure of directors other than the chairperson and full-time directors in cooperative banks from eight years to ten years.
A total of 19 amendments are proposed in the Banking Laws Amendment Bill 2024.
To ensure consistency in reporting by banks, the bill provides for reporting to RBI on the last day of every fortnight instead of Fridays.
Under the RBI Act, scheduled banks must maintain a certain level of average daily balance with the RBI as cash reserves. This average daily balance is based on the average of the balances held by banks at the closing of business of each day of a fortnight.
A fortnight is defined as the period from Saturday to the second following Friday (including both days). The Bill changes the definition of a fortnight to the period from the first day to the fifteenth day of each month or the sixteenth day to the last day of each month.
It also changes this definition under the Banking Regulation Act where non-scheduled banks are required to maintain cash reserves.
The bill redefines substantial interest in a company, currently it refers to holding shares of over Rs 5 lakh rupees or 10 per cent of the paid up capital whichever is less, this has been proposed to be hiked to Rs 2 crore. The central government is also empowered to alter the amount through a notification.
Another major provision in the proposed bill allows a director of a central cooperative bank to serve on the board of a state cooperative bank. Currently, directors can hold positions in only one institution and not more.
The structure of the cooperative bank necessitates this as unless a person is elected to one layer of the cooperative, they can't get into the next layer and as a result, they will necessarily have to hold a position at more than one place.
The bill also provides that any person whose shares or unclaimed/unpaid money is transferred to the Investor Education and Protection Fund (IEPF), he can claim the transfer or refund. Currently if money in any account remains unpaid or unclaimed for seven years, it is transferred to the IEPF.
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