Banking Amendment Bill 2024

Amendment Bill

The Banking Laws (Amendment) Bill, 2024, was recently introduced in the Lok Sabha by the Minister of State for Finance, Pankaj Chaudhary. This bill aims to enhance customer options and improve the governance structure within banks.

Notable Features of the Bill

Expanded Nominee Options:
One of the significant changes in the Bill is the provision for bank account holders to designate up to four nominees for their accounts. This is a considerable improvement from the current regulation, which only allows for one nominee.

Redefined ‘Substantial Interest’:
The Bill proposes to redefine what constitutes ‘substantial interest’ in bank directorships, increasing the threshold from ₹5 lakh to ₹2 crore. This adjustment acknowledges the economic growth India has experienced over the past six decades.

Bank Auditor Remuneration:
The amendment also empowers banks with greater autonomy in determining the remuneration of their statutory auditors.

Streamlined Regulatory Reporting:
The Bill introduces more efficient reporting requirements, mandating that banks submit compliance reports on the 15th and the last day of each month.

Legislative Background

This Bill seeks to modernize several key banking laws, including:

• 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) Acts of 1970 and 1980

These proposed amendments were initially outlined by Finance Minister Nirmala Sitharaman during the 2023-24 Budget speech, aiming to bolster bank governance and investor protection.

Opposition and Debate

Despite the Bill’s intentions, it has faced criticism, particularly from Congress member Manish Tewari. He contends that state governments should retain the authority to legislate on cooperative societies. In response, Finance Minister Sitharaman clarified that the Bill specifically addresses banking regulations and does not encroach on the jurisdiction of cooperative banks with banking licenses.

Understanding the Reserve Bank of India Act

The Reserve Bank of India (RBI) was established by the RBI Act of 1934, with operations commencing on April 1, 1935. The RBI’s primary roles include regulating currency, maintaining monetary stability, issuing currency notes (except for one-rupee notes), and managing foreign exchange and inflation through monetary policy. Over the years, the Act has been amended 60 times to accommodate evolving financial needs. The first Governor of the RBI was Osborne Smith. The Act remains foundational in defining the RBI’s role in steering India’s economic policy.