Proposed Amendments to Banking Laws Approved by Indian Union Cabinet
The Indian Union Cabinet has given the green light to a series of significant amendments to banking laws, aimed at addressing various financial matters to the benefit of account holders and the financial sector at large.
One of the key amendments is the provision to allow up to four nominees in deposit accounts, a substantial increase from the current allowance of one nominee for savings bank and fixed deposits. This move is intended to provide account holders with greater flexibility and options in managing their deposit accounts. Furthermore, the introduction of “successive and simultaneous” nominations seeks to alleviate hardship for customers, allowing joint account holders and heirs to access funds even after the demise of the primary account holder.
In addition to the amendments concerning deposit accounts, the proposed changes encompass reforms related to unclaimed deposits and funds. With unclaimed deposits reaching over Rs 78,000 crore as of March 2024, the amendments are a response to the mounting concern highlighted by Finance Minister Nirmala Sitharaman. The bill includes provisions to address unclaimed dividends and bonds, facilitating their transfer to the Investor Education Protection Fund (IEPF) in cases where the funds remain unclaimed.
Moreover, the amendments propose to grant banks greater autonomy in determining the remuneration for auditors, a responsibility previously mandated by the Reserve Bank of India (RBI). Additionally, the definition of shareholders with substantial interest is set to be revised, increasing the threshold from Rs 5 lakh to Rs 2 crore, marking a significant update from the previous limit set nearly six decades ago.
Furthermore, the bill seeks to redefine the reporting dates for banks for regulatory compliance, setting the dates as the 15th and last day of every month, as opposed to the current second and fourth Fridays. The proposed amendments also allow cooperative banks to appoint directors, other than the chairman and whole-time directors, for up to 10 years.
The exact details and provisions of these amendments are expected to be fully disclosed when Finance Minister Nirmala Sitharaman presents the bill in the Parliament, as the government and officials have maintained secrecy regarding the specific aspects of the plan.
The approval of these amendments represents a significant step towards addressing various concerns within the banking sector and underscores the Indian government’s commitment to ensuring the efficiency, transparency, and resilience of the financial system.
