Introduction and Highlights

  • The Banking Laws (Amendment) Bill, 2024 was passed by the Parliament of India on March 26, 2025, marking a significant reform in the country's banking sector.
  • The bill features a plethora of key changes inclusive of the rise in the number of nominees for a bank account holder to four and an increase in the limit for 'substantial interest' in a bank from ?5 lakh to ?2 crore.
  • The bill's amendments stand out given the several decades since the last modification.
  • The Rajya Sabha approved the bill through a voice vote post its passage in the Lok Sabha in December 2024.

 

Crucial Amendments

  • The number of nominees a bank account holder can have has been increased to up to four, extending to cash and fixed deposits. For lockers, only simultaneous nominations are allowed.
  • The bill redefines 'substantial interest' in a bank by increasing the threshold from ?5 lakh to ?2 crore.
  • The term of directors in cooperative banks has been increased, and statutory auditor remuneration policies have been revised with greater flexibility allowed for deciding auditor remuneration.
  • The timeline for regulatory reporting by banks has been altered.

 

Governance and Compliance

  • There has been an extension in the tenure of cooperative banks' directors from 8 to 10 years, excluding the chairman and the whole-time director.
  • Directors of Central Cooperative Banks now have the provision to serve on the board of State Cooperative Banks.
  • The bill has also facilitated alteration in regulatory reporting dates from the 2nd and 4th Fridays of the month to the 15th and last day of each month.

 

Enhancements in NPA Management and Performance

  • Finance Minister Nirmala Sitharaman underlined the government's commitment to reducing Non-Performing Assets (NPAs) and punishing wilful defaulters.
  • A total of 112 bank fraud cases handled by the Enforcement Directorate over the past five years highlighted the government’s crackdown on defaulters.
  • Public Sector Banks have recorded the highest-ever profit of ?1.41 lakh crore in the previous fiscal year with predictions of further profitability growth in 2025-26.

 

Comprehensive Reform

  • The amendments passed under the Banking Laws (Amendment) Bill, 2024 have impacted five different banking laws, making it an extensive reform in the banking sector.