Lok Sabha passes Banking Laws (Amendment) Bill allowing up to 4 nominees for accounts

New Delhi: The Lok Sabha on Tuesday passed the Banking Laws (Amendment) Bill, 2024, which allows bank account holders to nominate up to four individuals for their accounts. Another key change proposed in the bill is the redefinition of 'substantial interest' for directorships, which could increase to Rs 2 crore, up from the current limit of Rs 5 lakh, a threshold that has been in place for nearly 60 years.

The Bill, introduced by Finance Minister Nirmala Sitharaman, was passed by a voice vote. In her reply to the debate, Sitharaman explained that depositors would have the option of selecting either successive or simultaneous nominations, while locker holders could only opt for successive nominations.

She also highlighted that since 2014, both the Centre and the RBI have been extremely cautious to ensure 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 said.

The bill also proposes to extend the tenure of directors (excluding the chairman and whole-time directors) in cooperative banks from 8 years to 10 years, bringing it in line with the Constitution (Ninety-Seventh Amendment) Act, 2011.

Once passed, the bill would allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank. Additionally, the bill seeks to give banks more flexibility in determining the remuneration for statutory auditors. It also aims to redefine the reporting dates for banks' regulatory compliance, setting them to the 15th and last day of every month, instead of the second and fourth Fridays, PTI reported.

"The proposed amendments will strengthen governance in the banking sector and enhance customer convenience in terms of nomination and investor protection," Sitharaman said while moving the bill for consideration and passing.

Opposition members strongly criticised the bill, with TMC MP Kalyan Banerjee calling it a "donkey passage towards privatisation of the Indian banking sector". He argued that while the bill ostensibly seeks to improve bank guarantees and investor protection, its true intent is to reduce the government’s minimum holding in public sector banks from 51 per cent to 26 per cent.

Banerjee also raised concerns about cybersecurity, stressing the need for robust IT systems to detect fraud and ensure strict adherence to data privacy regulations.

Congress MP Karti Chidambaram also highlighted the growing issue of cyber fraud in the country, questioning what the government was doing to combat it. He further criticised the repeated KYC updates, stating that people were receiving calls from banks multiple times a year to update their KYC details, even when no changes had occurred. "To make life easier for customers, they must simplify the process and mandate that if there are no changes, there is no need to update KYC repeatedly," he said.

BJP's Konda Vishweshwar Reddy stated that the Bill aims to improve governance and urged all parties to support it. Arun Bharti of LJP (Ram Vilas) suggested that education loans in Bihar should be made cheaper and collateral-free.