Parliament approved the Banking Laws (Amendment) Bill to allow account holders to have up to four nominees and enhance investor protection, with the Rajya Sabha giving its nod to it on Wednesday.
The Lok Sabha passed the Bill on December 3 last year. The Bill aims to strengthen governance in the Indian banking sector, besides enhancing consumer convenience and investor protection. Now, depositors will have the option of successive or simultaneous nomination facility, while locker holders can have only successive nominations.
The Bill also enabled the transfer of 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 investor interests. Also, unpaid or unclaimed dividends are to be transferred to the unpaid dividend account of the corresponding new bank.
Another change relates to redefining “substantial interest”, which restricts loans to firms related to directors of banks. The threshold for a shareholding of a substantial interest has been increased from Rs 5 lakh to Rs 2 crore, reflecting the present value, as the same was last fixed in 1968. Currently, the Banking Regulation Act lays down the restrictions on loans and advances to the directors and the firms in which they hold substantial interest.
Replying to a debate on the Bill in the Rajya Sabha, finance minister Nirmala Sitharaman said the government is committed to taking stringent action against wilful defaulters. In the five years till January 29 this year, the Directorate of Enforcement has taken up around 912 cases related to bank fraud, including those pertaining to wilful default. In these cases, approximately Rs 44,204 crore of proceeds of crime have been attached, seized or frozen, the minister said. In eight cases, assets amounting to Rs 22,276 crore have been restituted to banks/legitimate claimants/victims of money-laundering, she said.
With the approval of the Bill, the tenure of directors (excluding the chairman and whole-time director) in cooperative banks can be increased from 8 years to 10 years so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.
Once it comes into effect, the amendment would allow a director of a central cooperative bank to serve on the board of a state cooperative bank.
It also gave greater freedom to banks in deciding the remuneration to be paid to statutory auditors.
The amendment is also aimed at redefining the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.
Sitharaman told the lawmakers that public sector banks posted the highest ever profit of about Rs 1.41 lakh crore in the last fiscal, and exuded confidence that the profitability would further increase in 2025-26.
