The Banking Laws (Amendment) Act, 2025 gets President’s assent
The President on 15.04.2025 has given assent to the Banking Laws (Amendment) Act, 2025. The Banking Laws (Amendment) Bill, 2024 was introduced in Lok Sabha on August 9, 2024 and passed by Lok Sabha and Rajya Sabha on 03.12.2024 and 26.03.2025 respectively.
The Highlights of the Banking Laws (Amendment) Act, 2025 can be summarised as under:
The Banking Laws (Amendment) Act, 2025, introduced significant reforms to modernize India’s banking sector by amending key statutes, including the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. Below are the key highlights based on available information:
1. Increased Nominees for Accounts and Lockers:
(i) Bank account holders and locker users can now appoint up to four nominees, compared to the previous limit of one.
(ii) Nominees can be appointed simultaneously (with specific percentage shares) or successively (in a predefined order), except for lockers, where only successive nomination is allowed. This enhances flexibility and simplifies fund access for families after the account holder’s death.
2. Redefinition of ‘Substantial Interest’:
(i) The threshold for “substantial interest” in a company, which affects directorship eligibility, was raised from ₹5 lakh (or 10% of paid-up capital, whichever is less) to ₹2 crore.
(ii) The central government can revise this amount via notification, reflecting current economic realities.
3. Revised Fortnight for Cash Reserves:
The definition of a “fortnight” for calculating cash reserve ratios (CRR) under the RBI Act was changed from a Saturday-to-Friday cycle to fixed calendar periods: 1st to 15th or 16th to the last day of each month.
This applies to both scheduled and non-scheduled banks, aiming to streamline regulatory compliance.
4. Cooperative Bank Governance Reforms:
(i) The tenure of directors (excluding chairman and whole-time directors) in cooperative banks was extended from 8 to 10 years, aligning with the Constitution (Ninety-Seventh Amendment) Act, 2011.
(ii) Directors of central cooperative banks can now serve on state cooperative bank boards if they are members, fostering better coordination.
5. Investor Education and Protection Fund (IEPF) Expansion:
(i) Unclaimed dividends, shares, and bond interest or redemption amounts unpaid for seven consecutive years are now transferable to the IEPF.
(ii) Individuals can claim refunds or transfers from the IEPF, enhancing investor protection.
6. Auditor Remuneration Autonomy:
(i) Banks now have greater freedom to determine statutory auditors’ remuneration, previously fixed by the RBI in consultation with the central government.
(ii) This aims to improve audit quality and align public sector banks with private sector practices.
7. Regulatory Reporting Changes:
(i) Reporting dates for regulatory compliance shifted from the second and fourth Fridays to the 15th and last day of each month, ensuring consistency.
(ii) The time for scheduled banks to submit CRR returns to the RBI was reduced from 7 days to 5 days.
Download The Banking Laws (Amendment) Act, 2025 Click Here >>
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