Bank Bill passes LS, allows one account, 4 nominees

Highlights:

• The Lok Sabha resumed its proceedings after five days of disruptions, passing the Banking Laws (Amendment Bill, 2024). The legislation introduces several significant changes aimed at strengthening governance and enhancing customer convenience in the banking sector. Finance Minister Nirmala Sitharaman, while presenting the Bill, emphasized its role in reducing unclaimed deposits and improving transparency in banking operations.

Key Provisions of the Bill

The Bill introduces notable reforms:

• Nominee Inclusion: Deposit holders and locker users can now nominate up to four individuals, replacing the current provision of a single nominee.
• Higher Shareholding Threshold: The limit for beneficial interest shareholding by an individual has been raised from ₹5 lakh to ₹2 crore.
• Extended Director Tenure: Directors of cooperative banks (excluding chairpersons and whole-time directors) can now serve ten years instead of eight.
• Statutory Reporting Updates: Reporting deadlines for banks to the RBI have been revised to align with the end of the fortnight, month, or quarter.

Addressing Unclaimed Deposits

• One of the Bill's primary objectives is to tackle the growing issue of unclaimed deposits, which surged by 26% year-on-year to ₹78,213 crore by March 2024, as per the RBI's annual report. The introduction of multiple nominees is expected to significantly reduce these unclaimed funds.

Heated Debate in Parliament

• While the Bill's passage marked progress in legislative business, heated exchanges between the treasury and opposition benches continued. Discussions centered on the banking industry's state, economic challenges, and allegations of corruption involving prominent business figures. The Speaker later expunged a ruling party MP's reference to a former Prime Minister linked to "phone banking."

Banking Sector Stability

• In her reply to the debate, Sitharaman highlighted the health of India’s public sector banks, noting they are now profitable and no longer dependent on government funding. Profits for public sector banks reached ₹85,520 crore in the first half of the current fiscal year. She contrasted India's banking resilience with global examples of regulatory failures, crediting reforms since 2014 for ensuring financial stability.

Implications for the Sector:

• The amendments signify a shift toward improved governance and depositor protection. By addressing concerns like unclaimed deposits, reporting clarity, and leadership terms in cooperative banks, the legislation aims to foster trust and efficiency in India's banking system.

Prelims Takeaways

• Reserve Bank of India
• Banking Laws, RBI Act