BANKING LAWS (AMENDMENT) BILL, 2024 (Syllabus: GS Paper 3 - Economy)

Context: Union Finance Minister of India tabled the Banking Laws (Amendment) Bill, 2024, in the Lok Sabha, introducing critical changes to key banking regulations.

Banking Laws (Amendment) Bill, 2024

• About: It introduces the ability for depositors to nominate up to four nominees simultaneously and successively.

Features:

• To enable the transfer of unclaimed dividends, shares, and interest or redemption of bonds to the Investor Education and Protection Fund (IEPF), allowing individuals to claim transfers or refunds from the fund, thus safeguarding investors' interests.
• Amendment: Amendments to sections 18, 24, 25, and 56 of the Banking Regulation Act and section 42 of RBI Act: 

o It will revise the reporting dates for the submission of statutory reports by banks to the RBI from reporting Friday to the last day of the fortnight, month, or quarter. 

• Service Tenure: The proposed change aims to increase the service tenure of directors, with the exception of the chairman and whole-time directors, in cooperative banks from eight years to ten years.
• Board Membership Flexibility: Amendment in sub-section(3) of section16 of the Banking Regulation Act: To allow a Director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
• Flexibility and Convenience: The amendment is designed to provide increased flexibility and convenience for depositors and their legal heirs, particularly concerning deposits, articles in safe custody, and safety lockers.
• Nomination Procedure: Successive nomination allows for multiple nominees listed in a specific order, with alternate nominees contacted if the primary nominee is unable to claim the funds.
• Allocation to Investor Education and Protection Fund (IEPF): The Bill proposes that unclaimed dividends, shares, interest, or redemption of bonds be allocated to the IEPF.
• Increase in 'Substantial Interest' Threshold: The Bill aims to raise the threshold defining 'substantial interest' in shareholding from Rs 5 lakh to Rs 2 crores.