Key Highlights of Banking Laws (Amendment) Bill, 2024
- Blog|News|FEMA & Banking|
- 3 Min Read
- By Taxmann
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- Last Updated on 6 December, 2024
Introduction
On December 3, 2024, the Lok Sabha passed the Banking Laws (Amendment) Bill, 2024, amending key banking legislations including the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. The proposed Bill introduces key amendments to enhance the efficiency, flexibility, and governance of banking operations in India. Some of the key highlights of the Banking Laws (Amendment) Bill, 2024 are as follows –
1. Reduction in the time period for submitting returns by Scheduled Banks from 7 days to 5 days
As per Section 42 of the RBI Act, 1934, every scheduled bank must send a return to the bank, signed by two responsible officers, not later than 7 days after the date to which it relates. Now, the Bill proposes to reduce the time period from 7 days to 5 days. The proposed norms aim to streamline the reporting process and enhance operational efficiency.
2. Amendment in the definition of ‘Substantial Interest’ by raising threshold from Rs 5 lakh to Rs 2 crore
As per Section 5(ne) of the Banking Regulation Act, 1949, the term “substantial interest” means –
(a) In relation to a company, means the holding of a beneficial interest by an individual or his spouse or minor child, whether singly or taken together, in the shares thereof, the amount paid-up on which exceeds Rs 5 lakh or 10% of the paid-up capital of the company, whichever is less;
(b) in relation to a firm, means the beneficial interest held therein by an individual or his spouse or minor child, whether singly or taken together, which represents more than 10% of the total capital subscribed by all the partners of the said firm;
The Bill now proposes to amend the definition by raising the threshold limit from Rs 5 lakh to Rs 2 crore or such other amount as may be notified in the Official Gazette by the Central Government.
3. Proposal to extend the tenure of directors in cooperative banks to 10 years
As per extant norms, no director of a banking company, other than its chairman or whole-time director, must hold office continuously for a period exceeding 8 years.
Now, the bill proposes to extend the tenure of directors in cooperative banks to 10 years. The proposed norms aim to provide more stability and continuity in the governance of cooperative banks.
4. Discretion of State Bank to fix remuneration of auditor
As per section 41(2) of the State Bank of India Act, 1955, the auditors must receive such remuneration as the RBI may fix in consultation with the Central Government. The bill now proposes that auditors must receive remuneration as the State Bank may fix.
5. Expansion in the scope of unclaimed assets transferred to Investor Education and Protection Fund
Section 38A of the State Bank of India Act, 1955 deals with the transfer of unpaid or unclaimed dividend. Section 38A(3) states that any money transferred to the unpaid dividend account of the State Bank, which remains unpaid or unclaimed for a period of 7 years from the date of transfer must be transferred to the Investor Education and Protection Fund (IEPF).
The bill now proposes to expand the scope of unclaimed assets to include unclaimed shares and any interest or redemption amount on bonds issued by the State Bank that remains unpaid or unclaimed for a period of seven years.
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