Banking Laws (Amendment) Bill, 2024

Syllabus :GS 3/Economy

In News

• The Lok Sabha passed the Banking Laws (Amendment) Bill, 2024.

About

• It amends the: 
  • (i) Reserve Bank of India (RBI) Act, 1934,
  • (ii) Banking Regulation Act, 1949,
  • (iii) State Bank of India Act, 1955,
  • (iv) Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and
  • (v) Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

Key Changes Made

• Redefining “Fortnight” for Cash Reserves: Shifting to a calendar month-based definition makes calculating the average daily balance for cash reserves simpler and more aligned with standard accounting practices.
  • Under the RBI Act, scheduled banks must maintain a certain level of average daily balance with the RBI as cash reserves. 
• Tenure of Co-operative Bank Directors: Extending the tenure to 10 years may provide more stability and continuity in the leadership of co-operative banks.
• Prohibition on Common Directors: The exemption for central co-operative bank directors serving on state co-operative bank boards could facilitate better coordination and collaboration within the co-operative banking sector.
• Substantial Interest in a Company: Raising the threshold to ₹2 crore reflects the changing economic landscape and may encourage greater investment in companies by individuals associated with banks.
• Nomination: Allowing up to four nominees provides greater flexibility for depositors in distributing their assets and can help streamline the inheritance process.
• Investor Protection: This strengthens investor protection mechanisms and promotes transparency in the handling of unclaimed funds.
• Remuneration of Auditors: Giving banks the power to decide auditor remuneration could provide more flexibility and allow them to attract qualified auditors.

Source: PRS