Banking Laws (Amendment) Bill, 2024 was passed by the Lok Sabha on Tuesday. The bill was introduced by Finance Minister Nirmala Sitharaman in the parliament. The bill proposed changes that would allow bank accounts to have up to four nominees among other changes. The Bill was approved by a voice vote.

The Banking Amendment Bill also proposes giving banks more freedom in deciding the remuneration of statutory auditors. The bill will be attempting to redefine the reporting dates of banks for regulatory compliance. It aims to change the reporting dates to the 15th and last day of every month instead of the second and fourth Fridays.

Banking bill primarily proposes to increase the tenure of directors (excluding the chairman and whole-time director). This change is proposed specifically for cooperative banks where the tenure of directors will be increased from 8 years to 10 years. The finance minister proposed this change so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.

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.

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