Parliament Enacts Comprehensive Amendments to Key Banking Legislations

The Banking Laws (Amendment) Act, 2025, an Act of Parliament, received presidential assent and was published in the Official Gazette on April 15, 2025. This significant legislative instrument introduces a series of amendments across five pivotal banking statutes: 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 Act is slated to come into force on a date or dates to be appointed by the Central Government through notification in the Official Gazette, allowing for different provisions to commence at varying times.

The amendments primarily aim to modernize regulatory frameworks, enhance depositor protection, and align existing banking laws with contemporary corporate governance standards, particularly those established under the Companies Act, 2013. Key changes include revisions to reporting periods for banks, modifications to nomination procedures for deposits and lockers, and updated provisions concerning unclaimed funds and auditor appointments. For instance, the Reserve Bank of India Act, 1934, saw alterations in Section 42, redefining "fortnight" for reporting purposes to mean either the first to fifteenth day or the sixteenth to the last day of a calendar month, both days inclusive. This change also adjusted the frequency of reporting from "each alternate Friday" to "the last day of each fortnight" and reduced the reporting period from seven days to five days. Similarly, the Banking Regulation Act, 1949, underwent several modifications, including an increase in the maximum amount for unsecured loans or advances that a banking company may grant to its directors or entities where directors are interested, from five lakh rupees to two crore rupees, or such other amount as the Central Government may notify. The Act also extended the maximum tenure for a director on the board of a co-operative bank from eight years to ten years. Furthermore, the legislation provided: "In the Banking Regulation Act, 1949, in section 45ZA, (a) in sub-section (1), for the words "one person", the words "one or more persons not exceeding four, either successively or simultaneously" shall be substituted;" This change allows depositors to nominate up to four individuals, either in a sequential order of priority or concurrently with specified proportions, for their bank deposits. Similar flexibility was introduced for locker hirers under Section 45ZE, permitting successive nominations for up to four persons. A new Section 45ZG was inserted to clarify the priority of successive nominations.

The legislative intent behind these amendments was to address existing statutory gaps and limitations within the banking sector, ensuring that the legal framework remains robust and responsive to evolving financial practices. The earlier legal position often restricted nominations to a single person, which could lead to complications in the event of the nominee's demise or other unforeseen circumstances. The new provisions for multiple nominations, both successive and simultaneous, aim to provide greater clarity and ease of access for beneficiaries, thereby enhancing depositor convenience and protection. The Act also sought to streamline compliance requirements by standardizing reporting periods for various banking operations, such as cash reserve and liquid asset maintenance, shifting from "last Friday" or "alternate Fridays" to "last day" or "last day of the fortnight." This rationalization is expected to simplify regulatory adherence for banking entities. Moreover, the amendments to the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980, specifically regarding Sections 38A, 10B, and 41, reflect a broader policy rationale to align the treatment of unclaimed dividends, shares, and interest amounts with the provisions of the Companies Act, 2013. These sections now mandate the transfer of any money, shares, or interest that remains unpaid or unclaimed for a period of seven years to the Investor Education and Protection Fund (IEPF), a fund established under the Companies Act, 2013, to promote investor awareness and protect investor interests. Claimants are now explicitly entitled to seek transfer or refund from the IEPF in accordance with the rules made under the Companies Act, 2013. References to the Companies Act, 1956, for auditor qualifications were also updated to correspond with Section 141 of the Companies Act, 2013, and the authority to fix auditor remuneration was shifted from the Reserve Bank of India to the respective banks. These changes collectively aim to foster a more transparent, efficient, and investor-friendly banking environment.

Keywords: Banking Laws, Amendment Act, Reserve Bank of India, Banking Regulation, State Bank of India, Nationalized Banks, Depositor Protection, Nomination Rules, Unclaimed Funds, Investor Education and Protection Fund, Companies Act 2013, Financial Sector Reform

Geo Tags: India, New Delhi District: Not Applicable