After the Winter Session of the Parliament finally became functional after much protests and boycotts, the Banking Laws (Amendment) Bill, 2024, introduced by the Union Finance Minister Nirmala Sitharaman, was passed by the Lok Sabha on Tuesday introducing significant reforms aimed at modernising India’s banking sector and enhancing customer convenience. This legislation amends several key banking laws, including the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, and the State Bank of India Act, 1955, among others.
A notable provision of the Act allows bank account holders to nominate up to four individuals for their accounts, a substantial increase from the previous limit of one. This change is designed to simplify the process of fund distribution after the account holder’s death, addressing challenges that arose during the COVID-19 pandemic. The bill also redefines “substantial interest” for directorships, raising the threshold from ₹5 lakh to ₹2 crore, a figure that had remained unchanged for nearly six decades.
Additionally, the Bill also extends the tenure of directors in cooperative banks from eight to ten years, aligning with constitutional amendments aimed at enhancing governance. Other provisions include adjustments to regulatory reporting deadlines and increased flexibility for banks in determining auditor remuneration.
The bill aims to improve governance standards, ensure better protection for depositors and investors, and streamline banking operations. While the government presents these amendments as a step towards strengthening the banking framework, opposition parties have raised concerns about potential implications for public sector banks going into private hands, especially those favoured by the Prime Minister and cybersecurity issues.
Jargon
- Nominations: The process by which a bank account holder can designate individuals to inherit their funds or assets in the event of their death. The recent amendment allows up to four nominees, enhancing flexibility in fund distribution.
- Substantial Interest: A term used to define the minimum financial stake required for individuals to hold directorship positions in banks. The threshold has been raised from Rs 5 lakh to Rs 2 crore to reflect current economic conditions.
- Regulatory Reporting: The process by which banks submit their financial reports to the Reserve Bank of India (RBI). The amendment changes the reporting deadlines to the 15th and last day of each month for consistency.
Viewpoints 💭
- The left criticises the bill for potentially paving the way for privatisation of public sector banks, which they argue could undermine the public interest and lead to job losses.
- Concerns are raised about cybersecurity and data privacy, with the left emphasising the need for robust measures to protect sensitive financial information.
- The left argues that the bill’s amendments could disproportionately benefit larger investors and corporate interests, rather than protecting small depositors and consumers.
- Opposition members express scepticism about the bill’s impact on cooperative banks, fearing it may erode state authority and local governance.
- The left highlights the potential for increased banking charges and fees, which could burden ordinary citizens and small businesses.
- While the left fears the bill could lead to privatisation and job losses in public sector banks, the right sees it as a modernisation effort to enhance efficiency and global competitiveness.
- The left raises alarms about cybersecurity and data privacy, demanding stringent protections, whereas the right focuses on the bill’s potential to streamline operations and improve governance.
- Opposition voices argue the bill favours corporate interests over small depositors, while proponents on the right emphasise its role in attracting investment and professional management.
- Concerns about the erosion of state authority in cooperative banks are voiced by the left, contrasting with the right’s view that the bill strengthens governance and leadership continuity.
- The left warns of increased banking fees burdening citizens, whereas the right highlights the bill’s provisions for multiple nominees as a customer-friendly measure to reduce unclaimed deposits.
- The right views the bill as a necessary step to modernise India’s banking sector, aligning it with global standards and enhancing operational efficiency.
- They emphasise the bill’s role in improving governance and investor protection, ensuring banks are professionally managed and financially stable.
- The right supports the increased autonomy for banks in deciding auditor remuneration, arguing it will attract skilled professionals and improve audit quality.
- They highlight the bill’s provisions for multiple nominees as a means to simplify fund distribution and reduce unclaimed deposits, benefiting account holders.
- The right praises the bill for extending director tenures in cooperative banks, which they believe will enhance leadership continuity and governance.
Prominent Voices 📣
- Gaurav Gogoi (Congress MP and Deputy Leader of Opposition): Criticised the government for prioritising optics over tangible results, questioning the effectiveness of demonetisation, GST, and electoral bonds, and highlighting the struggles of common people.
1
- Supriya Sule (NCP leader): Suggested a stricter approach to financial frauds, focusing on compensating victims.
2
- Karti Chidambaram (Congress MP): Raised concerns about rising cyber frauds and the inconvenience of frequent KYC updates, suggesting simplification of the process.
3
4
- Rajeev Rai (Samajwadi Party MP): Highlighted the struggles of common people with credit issues, pointing out poor communication from banks leading to financial distress for borrowers.
5
- Kalyan Banerjee (TMC MP): Criticised the bill as a move towards privatisation, expressing concerns about reducing government stakes in public sector banks and highlighting cybersecurity issues.
- Rani Srikumar (DMK MP): Criticised hidden banking charges and raised concerns about senior citizens’ vulnerability to cyber frauds.
- Manish Tewari (Congress Member): Opposed the Bill, arguing that it infringes on state authority over cooperatives.
6
- Saugata Roy (TMC Member): Described the Bill as superfluous, suggesting changes could be made administratively.
- N.K. Premachandran (RSP Member): Criticised the approach of amending five laws with a single bill.
- Nirmala Sitharaman (Finance Minister of India): Emphasised the bill’s role in strengthening banking governance, enhancing customer convenience, and ensuring better protection for depositors and investors, while highlighting the stability and professional management of Indian banks.
8
- Konda Vishweshwar Reddy (BJP MP): Supported the bill for its governance improvements and urged all parties to back it.
9
