Per new law, shares with unpaid dividends and unclaimed bond dues for seven years to go into IEPF
The Finance Ministry has announced August 1 as the appointed date for the implementation of provisions in the Banking Laws (Amendment) Act, 2025. These provisions relate to enhancing the threshold for substantial interest and widening the ambit of funds that banks must transfer to the Investor Protection and Education Fund, among others.
In a notification, the Ministry said: “The Central Government hereby appoints the 1st day of August, 2025 as the date on which the provisions of sections 3,4,5,15,16,17,18,19 and 20 of the said Act shall come into force.” However, the date for allowing the inclusion of four nominees in bank deposits/accounts/lockers is yet to be notified. It is expected to be announced once banks complete the software upgrades.
One key provision (Section 3 of new law) is related with definition of substantial interest. Before the enactment of the new law, under the Banking Regulation Act, substantial interest in a company referred to holding shares of over five lakh rupees or 10 per cent of the paid-up capital of the company, whichever was lower. This may be held by an individual, his spouse, or minor child, either individually or collectively. Now with the amendment, the threshold has been raised to ₹2 crore.This has been done to reflect the present value, as the earlier threshold was last fixed in 1968.
Section 4 and 5 deal with directors of co-operative banks. Till date, the Banking Regulation Act prohibited the director of a bank (except its chairman or whole-time director) to hold office for more than eight years consecutively. Now with the amendment, the period will be 10 years. Also, till date, a director on the bank’s board was not permitted to serve on the board of another bank. This does not apply to directors appointed by RBI. Now the amendment l extends this exemption to the director of a central co-operative bank. This exemption will apply where he is elected to the board of a state cooperative bank in which he is a member
Two other provisions (Section 15 to 20 of new law) are related with settlement of unclaimed amounts and remuneration of auditors. The State Bank of India Act, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 provide for transferring unpaid or unclaimed dividend to an unpaid dividend account. If the money in the account remains unpaid or unclaimed for seven years, it is transferred to the Investor Education and Protection Fund (IEPF). Now the amendment widens the ambit of the funds that can be transferred to the IEPF. These include shares for which dividend has not been paid or claimed for seven consecutive years, and any interest or redemption amount for bonds which is unpaid/ unclaimed for seven years. Any person whose shares or unclaimed/ unpaid money is transferred to IEPF can claim the transfer or refund.
Till now, remuneration of auditors is used to be fixed by the RBI in consultation with the central government. Now the amendment empowers banks to decide the remuneration of their auditors.
Published on July 30, 2025
