Banking laws amendment Bill 2024
Introduced in Lok Sabha on August 9, 2024. Amends the following Acts:
(i) Reserve Bank of India (RBI) Act
(ii) Banking Regulation Act
(iii) State Bank of India Act
(iv) Banking Companies (Acquisition and Transfer of Undertakings) Act of 1970 and 1980.
Summary of major amendments:
A)Definition of fortnight for the purpose of maintenance of cash reserves:
Under the RBI Act, scheduled banks must maintain certain amount as average daily balance (ADB) with RBI as cash reserves.
for this purpose, ADB refers to average of the balances held by banks, at the closing of business of each day of a fortnight.
(i) Before this amendment, a fortnight is defined as the period from Saturday to the second following Friday (including both days).
Bill amends the definition of fortnight to the period from: (i) first day to fifteenth day of each month, or (ii) sixteenth day to the last day of each month.
(ii) Further, amendments also provides that Non-scheduled banks are all required to maintain cash reserves.
B) Provisions regarding Cooperative banks:
(i) Tenure of directors :
Currently, the Banking Regulation Act prohibits the director of a bank to hold office for more than eight years consecutively. exception: except its chairman or whole-time director.
Amendment: The Bill seeks to increase this period to 10 years for co-operative banks
(ii) Prohibition on common directors in case of co-operative banks:
Currently, Banking Regulation Act prohibits a director on a bank’s board to serve on the board of another bank. Exception: This does not apply to directors appointed by RBI.
Amendment: The Bill extends this exemption to the director of a central co-operative bank.
This exemption will apply where he is elected to the board of a state cooperative bank in which he is a member.
C) Shareholding: Substantial interest
-Under Banking Regulation Act, substantial interest refers to holding shares of over Rs. 5 lakhs or 10% of the paid-up capital of the company, whichever is less.
It may be held by an individual, his spouse, or minor child, either individually or collectively.
Amendment: The Bill amends increase the threshold to Rs. 2 Crores. The central government may alter the amount through a notification.
D) Depositors: Nomination
At present, the banking norms allows deposit holders to appoint only one nominee for their deposit or locker facility.
Amendment: Bill allows the appointment of up to four nominees for these purposes.
For deposits: such nominees can be appointed either successively or simultaneously
For other purposes: they can be appointed successively.
Nominee Priority: In case of simultaneous nominees, the nomination will be effective in a declared proportion.
For successive nomination, the nominee who has been named higher in the order of nomination will receive priority.
E) Settlement of unclaimed amounts:
Current provision state that any Dividend not paid or not claimed within 30 days of declaration is transferred to unpaid dividend bank account. If the money in the account remains unpaid or unclaimed for seven years, it is transferred to the Investor Education fund
Amendment: The Bill widens the ambit of the funds that can be transferred to the IEPF. These include:
(i) Shares for which dividend has not been paid or claimed, for seven consecutive years
(ii) any interest or redemption amt for bonds, which is unpaid/ unclaimed for seven years.
F) Remuneration of auditors:
At present, the remuneration paid to the auditors of banks is fixed by the RBI in consultation with the central government.
Amendment : Bill empowers banks to decide the remuneration of their auditors.