Banking Laws Amendment Bill 2024

August 10, 2024

Minister of State for Finance Pankaj Chaudhary introduced the Banking Laws (Amendment) Bill, 2024, in the Lok Sabha. The purpose of this Bill is to give customers more options and to improve the way banks are governed.

Key Provisions of the Bill

Nominee Options: The Bill allows bank account holders to name up to four nominees for their accounts, instead of just one, as is the current rule.

Definition of ‘Substantial Interest’: The Bill proposes raising the limit for what counts as a ‘substantial interest’ in bank directorships from ₹5 lakh to ₹2 crore. This change reflects how the economy has grown over the past sixty years.

Bank Auditor Remuneration: Banks will have more control over how much they pay their statutory auditors.

Regulatory Reporting Dates: The dates by which banks must report compliance will now be the 15th and last day of each month, making the process more efficient.

Legislative Background

The Bill aims to update several important 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) Act, 1970
The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980

These changes were first mentioned by Finance Minister Nirmala Sitharaman during her 2023-24 Budget speech. They are designed to strengthen how banks are managed and to protect investors.

Controversy and Opposition

However, Congress member Manish Tewari opposed the Bill, arguing that state governments should have the power to make laws about cooperative societies. In response, Finance Minister Sitharaman explained that the Bill is focused on banking regulations and does not intend to interfere with cooperative banks that have banking licenses.

Facts about the Reserve Bank of India Act

The Reserve Bank of India (RBI) was established by the RBI Act in 1934, officially starting on April 1, 1935. Initially, the RBI’s main job was to regulate currency and maintain monetary stability. The Act gives the RBI the authority to issue currency notes (except one-rupee notes) and to manage foreign exchange and inflation through monetary policy. The Act has been amended 60 times to include new financial regulations. The first Governor of the RBI was Osborne Smith. The Act outlines the roles of the central bank in managing India’s economy.

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