Introduction and Key Changes

  • On March 26, 2025, Parliament passed the Banking Laws (Amendment) Bill, 2024, passing several pivotal reforms in India’s banking sector.
  • It was approved by the Rajya Sabha through a voice vote and was earlier passed by the Lok Sabha in December 2024.
  • Interesting amendments include allowing bank account holders to have up to four nominees and redefining the financial threshold for 'substantial interest' in a bank.
  • The bill also modifies tenure of directors in cooperative banks, revises the remuneration policies for statutory auditors, and changes bank reporting dates for regulatory compliance.

 

Key Highlights of the Bill

  • Bank account holders can now have up to four nominees for cash, fixed deposits and lockers.
  • The bill increased the financial threshold for 'substantial interest' in a bank from ?5 lakh to ?2 crore, a shift after nearly six decades.
  • Regulations for cooperative banks have been revised, now directors, with exceptions to chairman & whole-time director, can serve for 10 years, an increase from the previous eight years. Moreover, directors of Central Cooperative Banks can now serve on the board of State Cooperative Banks.
  • Auditor remuneration can be decided by the banks with more flexibility, and regulatory reporting dates have been shifted from the 2nd and 4th Fridays of the month to 15th and the last day of each month.

 

Government's Stand on NPA's and Wilful Defaulters

  • Finance Minister Nirmala Sitharaman highlighted the government’s commitment to reducing Non-Performing Assets (NPAs) and taking stringent action against wilful defaulters.
  • The Enforcement Directorate has handled 112 bank fraud cases in the last five years.

 

Public Sector Banks Performance

  • Public sector banks recorded their highest-ever profit of ?1.41 lakh crore in the last fiscal year with further profitability growth expected in 2025-26.

 

Comprehensive Banking Reform

  • This amendment impacts five different banking laws, making it a substantial reform in the banking sector in India.