A Move Towards Modernising India's Banking Industry with the Banking Laws (Amendment) Bill 2024 The Indian parliament has recently made significant progress in reforming the country’s banking industry with the approval of the Banking Laws (Amendment) Bill, 2024. The law outlines a number of major reforms that will be undertaken with the aim of bettering the governance of banks, increasing the protections afforded to investors as well as enhancing the ease with which a customer interacts with a specific institution.

Banking Laws (Amendment) Bill 2024 Key Highlights

There shall be a number of nominees for bank accounts: It is one of the most notable areas that this bill proposes, which is perhaps recommending four nominees for a bank account.  With this, the members of the family, the nominees would be able to share the account fund on the death of the account holder without waiting for a long time until there is a legal process. The account holders have the convenience as the nominees may be able to inherit in a specified order or specific portions would be allotted to them.

Relaxation of Substantial Interest: Bar set for Directors On the other hand, the measure introduced in the bill gives more leeway with the limit of five hundred thousand rupees, now raised to two crore rupees, as the “substantial interest in the functioning of the bank”. It is expected that this kind of relaxation would attract more manpower into the banking sector and therefore enhance the composition and the diversity in terms of experience within the boards of the banks.

Enhanced Cooperative Banking Sector’s Governance Structure: The law provides for the alteration of maximum term limit for directors’ in cooperative banks in line with constitutional provisions, from eight to ten years. It also permits Central Cooperative Bank executives to serve on the boards of State Cooperative Banks, thereby enhancing efficiency and teamwork.

Enhanced Bank Managed Auditors’ Fees: The statute provides measures that would allow the banks to have additional freedom in respect of the fees to statutory auditors. This is expected to attract quality auditing firms and will ensure proper and adequate financial scrutiny of the institutions.

Changed Filing Dates for Regulatory Reports: In a bid to ease operational burden on banks, the bill provides for changes in the dates of filing compliance reports to be the fifteenth as well as the last day in a month.

Consequences for the Banking Industry

With the endorsement of the Banking Laws (Amendment) Bill, 2024, it can be said that there are improvements envisaged to elevate the Indian banking industry towards more robust and customer centric operations. 

It is also expected that the bill will introduce some changes which will;

• Enhance customers’ experience: By providing account holders more options and simplifying the nomination process.
• Give substantial improvements to the governance of banks: By recruiting experienced directors and giving banks the power to appoint meticulous auditors.
• Collate and ease more reporting requirements and the administrative burden on banks in compliance with regulations to expand regulatory compliance.
• Help integration of finances by making the availability and use of banking facilities more possible and easier for more people. 

While the bill has been widely welcomed, some concerns have been raised regarding potential risks such as increased cyber threats and the need for robust cybersecurity measures. It is crucial for banks to invest in advanced security technologies and implement stringent data protection policies to safeguard customer information.

As the Indian banking sector continues to evolve, it is essential to strike a balance between innovation and regulation. This bill represents a significant step forward in that direction, and its implementation will be closely watched by industry stakeholders and customers alike.