The Lok Sabha has passed the “Banking Laws (Amendment) Bill, 2024”, introducing some reforms to the banking sector. One of the most notable changes is the ability for customers to nominate up to four individuals for their bank accounts, lockers, and other banking services. This replaces the previous restriction of having only one nominee.

Enhanced Customer Rights and Service

Finance Minister Nirmala Sitharaman, while presenting the bill, explained that the amendments aim to modernize banking operations and enhance customer experience. A key highlight of the legislation is its empowerment of banks, including the autonomy to decide their auditors’ fees and other operational details without external interference.

She also mentioned this reform amends multiple laws, including the RBI Act of 1934, the Banking Regulation Act of 1949, the SBI Act of 1955, and the Banking Companies Acts of 1970 and 1980.

Addressing Banking Challenges

During the COVID-19 pandemic significant gaps in banking regulations, especially concerning nominee rights. Numerous disputes arose when multiple claimants wanted access to funds in accounts without clear nomination guidelines. In response, the government introduced this amendment to give account holders the freedom to decide how their funds should be distributed among loved ones.

Under the new rules, account holders can specify the share of funds for each of their nominees, simplifying inheritance processes and reducing legal complications. This will help users to claim nominations more easily and hassle-free.

Strengthening Cooperative Banking

The amendment also focuses on strengthening cooperative banking. The tenure of directors in cooperative banks has been increased from 8 years to 10 years, ensuring longer-term governance stability. Additionally, directors of Central Cooperative Banks are now eligible to serve on the boards of State Cooperative Banks, fostering better coordination between central and state-level institutions.

Changes in Cash Reserve Calculations

In another significant move, the process for calculating banks’ cash reserves has been revamped. Instead of determining cash reserves on the second Saturday of each month, banks will now perform this calculation from the 15th or 16th day of the month. This change is designed to streamline operations and improve financial management within banks.