Government to Introduce Two Key Bills in Lok Sabha
The government is set to bring forward two significant Bills in the Lok Sabha for deliberation in the upcoming week commencing on August 5. The first of the two Bills pertains to amendments in the banking laws, while the second addresses modifications to the Oilfields (Regulation and Development) Act.
Changes in Banking Laws
The Union Cabinet, during its meeting on Friday, granted approval for the introduction of the ‘Banking Laws (Amendment) Bill 2024.’ While specific details are yet to be disclosed due to the ongoing parliamentary session, it is anticipated that the Bill will encompass alterations to various banking laws. This may include redefining substantial interest for directors, revising the number of nominees for bank accounts, and adjusting the dates for monthly reporting, among other amendments.
Under the current provision of the Banking Regulation Act, Section 45ZA allows a depositor to nominate one individual to whom the deposit amount shall be returned in the event of the depositor’s demise. However, sources suggest that the proposed amendment may raise the number of nominees to four.
Targeting Unclaimed Deposits
One of the primary objectives of the proposed changes is to address the issue of unclaimed deposits in banks. Data reveals a substantial increase in unclaimed deposits with public and private sector banks combined, reaching over ₹42,000 crore as of March 31, 2023, from around ₹33,000 crore a year earlier. Unclaimed deposits comprise balances in savings or current accounts that have remained inactive for 10 years, or term deposits that have not been claimed within 10 years from their maturity date. Such amounts are designated as ‘unclaimed deposits’ and are transferred by banks to the Depositor Education and Awareness (DEA) Fund maintained by the Reserve Bank of India.
Despite depositors retaining the right to claim these deposits along with accrued interest at a later date, the increasing trend in unclaimed deposits remains a concern. The proposal to allow for four nominees aims to mitigate the amount of funds categorized as unclaimed deposits.
Other Proposed Amendments
Further changes include the redefinition of ‘substantial interest’ for directorship. The current provision in the Banking Regulation Act defines ‘substantial interest’ as a beneficial interest held by an individual, their spouse, or minor child, either singly or collectively, in shares with a paid-up value exceeding ₹5 lakhs or 10% of the paid-up capital of the company, whichever is lesser. Reports indicate a proposal to increase the threshold for substantial interest in directorship to ₹2 crore or 10% of the paid-up capital.
Additionally, amendments are expected regarding the reporting dates and the tenure for directors in co-operative banks. The existing provision requires banks to report various compliances on the second and fourth Friday of every month, which is now proposed to be changed to the 15th and 30th day of each month. There is also an anticipated provision to limit the tenure of a director in a co-operative bank to 10 years.
These impending changes in banking laws and regulations hold significance for the banking industry and the overall economic landscape, with potential implications for stakeholders and consumers alike.
