Banking Laws (Amendment) Bill which was passed through a voice vote by the finance minister Nirmala Sitharaman
The Lok Sabha on Tuesday passed amendments to banking laws allowing account holders to have up to four nominees, either in the order of succession or in parallel with the respective share, thereby making the inheritance of bank deposits smooth and unambiguous.
The Banking Laws (Amendment) Bill, 2024 also contains 19 amendments to five laws for ease of compliance, better regulation and efficient auditing of banks, including multi-state cooperatives providing banking services, Union finance minister Nirmala Sitharaman said.
“The issues of the governance in the Indian banking sector have been addressed in a big way and the proposed amendments will enhance consumer’s and customer’s ease with respect to nominations and protection of investors,” the minister said in her opening remarks in Lok Sabha on Tuesday.
Apart from a people-friendly multiple nomination provision to prevent deposits lying unclaimed in case an account holder passes away, amendments also entail some regulatory amendments, including practical timelines for banks to file statutory reports to the central bank to maintain the soundness of the banking system.
To questions on the nomination, Sitharaman informed the House that the existing provision provides only on the name of one person for the payment of money and articles kept in safe custody or lockers of the depositor. She said the proposed amendments will allow individuals to nominate up to “four people” for these facilities with the option of “either” successive “or” simultaneous nominations.
She clarified that in the case of articles kept in safe custody or safety lockers, only successive nominations will be permitted. “Successive nomination is important as it ensures the next nominee in line becomes operative in the event that the first nominee is not in a position to claim the account while ensuring continuity and minimizing complications [for] legal heirs,” she added.
“The proposed Bill also seeks, inter alia, to enhance governance standards bring uniformity in reporting by banks to the Reserve Bank of India [RBI], offer better protection for depositors and investors, enhancement in audit quality in public sector banks, customer convenience in regard to nominations and to provide for increase in the tenure of the directors in cooperative banks,” she said in a written statement attached with the Bill.
Earlier, while speaking in the house before the passage of the legislation, the finance minister said that Indian banks are stronger than the weak global banking system, especially in some developed countries.
“Since 2014 we have been super careful that banks are stable,” she said adding that the desired outcome is for banks to be “safe, stable and healthy” and the result is evident over 10 years. Banks are now “professionally run” and it is a “national” achievement, she added.
The Bill, tabled in Lok Sabha on 9 August, sought to amend five Acts — the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 (or the BR Act), 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.
Outlining the salient features of the amendments in the Bill, the finance minister noted in the accompanying note that the BR Act is being amended to redefine “substantial interest”, by increasing the threshold of shareholding of a beneficial interest by an individual, from ₹5 lakh to ₹2 crore, to move up with the present value. The ₹5 lakh amount was fixed in 1968.
The second amendment in the BR Act seeks to increase the tenure of directors (other than the chairman and whole-time director) in cooperative banks from eight to 10 years to be in sync with the present legal provisions. A modified provision was also included to exempt from a proposed prohibition on a director of a central cooperative bank serving on the board of a state cooperative bank. The law was also being amended to change the due dates for submission of statutory reports by banks to RBI to ensure that reporting is consistent, he added.
The additional provisions also are to be made in other laws to enable the transfer of unclaimed dividends, shares, and interest or redemption of bonds to the Investor Education and Protection Fund, and enable individual petitioners seeking transfer or refunds from the fund. The Bill also has a provision for empowering public sector banks with discretion in terms of auditor remuneration.
