The Lok Sabha on Tuesday (December 3) debated and passed the Banking Laws (Amendment) Bill, 2024 through a voice note after a week-long logjam concluded. Proposed by Union Finance Minister Nirmala Sitharaman, the bill presents significant changes to augment governance in the banking sector and improve customer convenience.
The bill was introduced on August 9, 2024, in a move to improve banking regulations in the current financial landscape.
While moving the bill, Sitharaman emphasised on the successive or simultaneous nomination facility for the depositors, streamlining inheritance process, whereas locker holders will only have successive nomination.
The bill seeks to bring about changes in the RBI Act of 1934, the Banking Regulation Act of 1949, the State Bank of India Act of 1955, the Banking Companies (acquisition and transfer of undertakings) Act of 1970, and the Banking Companies (acquisition and transfer of undertakings) Act of 1980.
Key provisions in the Amendment
The key provisions of the bill include:
- The bill introduces a significant change allowing customers to have up to four nominees in their bank accounts.
- Another change includes a limit of ‘substantial interest’ for directorships, which increases the cap from ₹5 lakh to ₹2 crore. The existing limit was fixed almost six decades ago.
- It enables a Central Cooperative Bank director to serve on the board of a State Cooperative Bank.
- It aims on granting flexibility to the banks on deciding the remuneration being paid to statutory auditors.
- The bill shifts the regulatory compliance to the 15th and last day of every month from the current deadlines of second and fourth Fridays.
- The bill also proposes on raising the tenancy of directors from 8 years to 10 years in cooperative banks, with the exception of the chairman and whole-time director. This aligns with the Constitution (Ninety-Seventh Amendment) Act, 2011.
Fierce criticism from the opposition
The bill faced criticism from the opposition MPs citing it as a move towards ‘privatization’ of the banking sector.
Trinamool Congress MP Kalyan Banerjee called it a “donkey passage towards privatization”. He implied concerns regarding cybersecurity, calling for a stringent compliance to data privacy regulations and the need for strong IT systems for detection of frauds.
He also stated the government’s minimization of holdings in public sector banks, with a decrease from 51 to 26 per cent.
Congress MP Karti Chidambaram, demanded a response from the government on the measures undertaken to resolve increasing cyber frauds.
He also pointed to the issue of the “tyranny of KYC”, calling for a simplified and mandated process. Chidambaram said that customers face the problem of receiving multiple calls from banks, urging for KYC updation on an annual basis, even when there are no changes.
No merger of PSBs
Minister of State for Finance Pankaj Chaudhary ruled out on any further mergers of the Public Sector Banks (PSBs).
Responding to a question with a written reply raised in the Rajya Sabha, he clarified with a response stating ‘no’ on Tuesday. He also emphasized on multiple steps undertaken by the government to strengthen the financial condition of Public Sector Banks (PSBs).
He highlighted the systemic improvement in capital adequacy ratio and gross non-performing assets position post-merger, in addition to curbing to minimize the risk of recurrence of excessive stress.
Earlier in 2019, the government had consolidated 10 banks into four, which came into effect from April 1, 2020.
Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank, Allahabad Bank was merged into Indian Bank, Syndicate Bank was merged with Canara Bank, Andhra Bank and Corporation Bank were merged into Union Bank of India, and Vijaya Bank and Dena Bank were merged with Bank of Baroda.
