Staff Reporter
In an important step towards banking reform, the Lok Sabha on Tuesday passed the Banking Laws (Amendment) Bill, 2024. The Bill seeks to amend 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 Bill also seeks to increase the option for nominees per bank account to four, from the existing one.
The bill also proposes to redefine substantial interest for directorships, which could increase to two crore rupees instead of the current limit of five lakh rupees. Moving the bill, Union Finance Minister Nirmala Sitharaman said that the proposed amendment will strengthen the governance in the banking sector apart from enhancing customer convenience.
Account Share Distribution
The bank account holders will now be able to decide on which nominee receives what amount of account share. The bank account nominees will receive a predetermined amount of bank account shares. The account share will be predetermined by the account holder. This change will assist the bank account holder as it will aid the work of distributing the money deposited in the bank easily.
Multiple Nominee Provision: What’s Behind The Rule Change?
The banking system earlier only allowed one person to be nominated as a nominee. However, following the deaths of many people in the aftermath of COVID-19, banks were overwhelmed with legal disputes. The legal disputes were a result of multiple people staking claims on a single account. Keeping this in mind the change to grant the account holder the right to distribute the amount deposited was made. This will empower to account holder to make correct decisions.
Co-operative Director Tenure
The new bill will also drastically aid the way for changes to be made regarding the management of co-operative banks. The new bill has increased the tenure of directors of cooperative banks from 8 years to 10 years. The directors of central cooperative banks have now been allowed to become members of the board of directors of state cooperative banks.
Directorship Interest
The new bill also aims to strengthen ‘substantial interest, for directorships. The proposed change will increase the substantial interest for directorships to Rs 2 crore instead of the current limit of Rs 5 lakh. The change was necessary as it was fixed almost six decades ago.
“The intention is to keep our banks safe, stable, healthy, and after 10 years you are seeing the outcome,” Sitharaman said. She also said that since 2014, the Government and the RBI have been extremely cautious, so that banks remain stable. Replying to the debate on the Bill, Sitharaman said, The depositors will now have the option of successive or simultaneous nomination.
While introducing the bill, Finance Minister Nirmala Sitharaman said this bill has various objectives. Primarily it is to strengthen governance in the country’s banking system and provide good service to the common customers.