Union Finance Minister Nirmala Sitharaman introduced the Banking Laws (Amendment) Bill, 2024, in the Lok Sabha today on December 3, 2024, which aims to improve governance standards, enhance depositor and investor protection, and bring greater consistency in banking operations and reporting.
One of the key amendments proposes increasing the tenure of directors in banks, other than the chairperson and whole-time directors in cooperative banks, from the current eight years to ten years. This change is expected to provide stability in the governance of cooperative banks.
The bill also seeks to address the prohibition on common directorship in cooperative banks. Currently, a director cannot serve on the boards of more than one bank, except in cases where the director is appointed by the Reserve Bank of India (RBI).
The proposed amendment extends this exemption to directors of central cooperative banks, allowing them to also serve on the board of a state cooperative bank where they are members. This aims to enhance coordination and strengthen leadership within the cooperative banking sector.
To improve flexibility for depositors, the bill allows up to four nominees for deposit accounts. It includes provisions for simultaneous and successive nominations, ensuring easier access to funds, articles in safe custody, and safety lockers for legal heirs.
Another provision enables the transfer of unclaimed dividends, shares, and unpaid interest or redemption amounts from bonds to the Investor Education and Protection Fund (IEPF). Individuals can claim these funds from the IEPF, ensuring their interests are safeguarded.
The bill revises the timelines for banks to submit statutory reports to the RBI, changing the reporting dates from Friday to the last day of the fortnight, month, or quarter. This adjustment ensures consistency in reporting standards across the banking system.
The Banking Laws (Amendment) Bill, 2024, is intended to enhance governance and transparency in banks, improve the quality of audits in public sector banks, strengthen depositor and investor rights, and bring much-needed changes to the regulatory framework governing cooperative banks.
