Lok Sabha Passes Banking Laws Amendment Bill 2024

The Lok Sabha recently passed the Banking Laws (Amendment) Bill, 2024, enhancing customer experience and protecting citizens. This bill allows bank account holders to nominate up to four individuals for their accounts. The primary objective of this move is to reduce the volume of unclaimed deposits in banks, which has been a significant issue in the banking sector.

Finance Minister Nirmala Sitharaman stated that depositors would have the option of successive or simultaneous nomination facility. However, locker holders would only have successive nominations. This change is crucial as proper nomination is key to claiming deposits in the bank in the event of unexpected life scenarios. The absence of proper nomination has been a significant reason for the accumulation of large amounts of unclaimed deposits in the banking system.

Another significant change brought about by the bill is the redefinition of ‘substantial interest’ for directorships. The limit could increase to Rs 2 crore from the current limit of Rs 5 lakh, which was fixed almost six decades ago.

The bill also brings about changes in the cooperative banking sector. It proposes to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years. This is aimed at aligning with the Constitution (Ninety-Seventh Amendment) Act, 2011.

The bill also seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors. This function was earlier controlled by the Reserve Bank of India in consultation with the central government.

The bill faced criticism from the opposition for being a “step towards privatisation”. However, the government has maintained that the amendments are aimed at strengthening the banking sector and protecting the interests of the consumers.

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. It is expected to improve the governance of banks, enhance customer experience, and protect the interests of the consumers. The bill is also expected to boost the economy by ensuring the stability and health of the banking sector.