Banking Laws (Amendment) Bill 2024: What's proposed and why it's being opposed?

Banking Laws (Amendment) Bill, 2024, explained: The Lok Sabha on December 3 debated the Banking Laws (Amendment) Bill, 2024, spearheaded by Union Finance Minister Nirmala Sitharaman, as per a PTI report.

Notably, Sitharaman proposed the bill in Parliament on December 3 and was approved for presentation by a voice vote. The finance minister said that since 2014, the government and the Reserve Bank of India (RBI) have been “extremely cautious” so that banks remain stable. “The intention is to keep our banks safe, stable, and healthy, and after 10 years, you are seeing the outcome,” she stated.

During the debate on the bill, it faced criticism from the opposition for being a “step towards privatisation”, the report added.

Mint examines the particulars of this amendment, which was proposed during this month's Parliament's Winter Session.

Banking Laws (Amendment) Bill, 2024 — All You need to know

• The proposed amendment allows bank account holders to have up to four nominees in their accounts.
• It also redefines the ‘substantial interest’ limit for directorships, increasing the cap from ₹5 lakh to ₹2 crore. The current limit was fixed almost six decades ago. 
• As per Sitharaman, this amendment gives depositors the option of successive or simultaneous nomination facility, while locker holders will have only successive nominations.
• It proposes increasing the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years to align with the Constitution (Ninety-Seventh Amendment) Act, 2011.
• It also proposes allowing a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.
• It seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors.
• It seeks to redefine the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.

‘Passage Towards Privatisation’

Moving the bill for consideration and passing, Sitharaman said that it would “strengthen governance in the banking sector and enhance customer convenience with respect to nomination and protection of investors”.But the opposition MPs were unconvinced.

Among the vocal critical comments came from TMC MP Kalyan Banerjee, who described the amendment as a “donkey passage towards privatisation of the Indian banking sector.” He also raised concerns over cybersecurity, the need for robust IT and fraud detection systems, and “strict adherence to data privacy regulations.”

“While the bill ostensibly seeks to improve bank guarantees and investor protection, its real intent is to reduce the government’s minimum holding in public sector banks from 51 to 26 per cent,” Banerjee argued.

Banerjee's concerns about cybersecurity were echoed by Congress MP Karti Chidambaram, who demanded a government response on what measures are being taken to tackle rising cyber frauds.

Chidambaram also raised the issue of the “tyranny of KYC”, saying that it should be stopped as people receive multiple calls from banks for KYC updating annually, despite no change in details. “In order to make life easier for the customer, they must simplify and mandate that if there is no change (in KYC), there is no reason to update your KYC multiple times in a year,” he said.

(With inputs from PTI)