Nirmala Sitharaman tables Banking Laws (Amendment) Bill. Here's what it aims to do

FM Sitharaman tables Banking Laws (Amendment) Bill in Lok Sabha

Finance minister Nirmala Sitharaman on December 3 moved the Banking Laws (Amendment) Bill in the Lok Sabha, saying the changes would enhance customer convenience.

The minister said 19 amendments are being proposed to bring changes in the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, 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.

"The proposed amendments will strengthen governance in the banking sector and enhance customer convenience with respect to nomination and protection of investors," Sitharaman said.

>> The bill proposes to allow a bank account holder to have up to four nominees in their account.

>> It also seeks to transfer 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.

>> The bill also seeks to improve governance standards, provide consistency in reporting by banks to the Reserve Bank of India, ensure better protection for depositors and investors, improve audit quality in public sector banks, bring customer convenience in respect of nominations and provide an increase in the tenure of the directors in co-operative banks.

>> The bill also seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors.

>> Another proposed change seeks to redefine "substantial interest" for directorships, which could increase to Rs 2 crore from Rs 5 lakh, which was fixed almost six decades ago.

The bill proposes to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years, so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.

Once the bill is passed, it would allow a director of a central cooperative bank to serve on the board of a State Cooperative Bank.

It also seeks to redefine the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.

The minister announced the plan in her Budget speech in July, aimed at improving "bank governance and enhance investors' protection".