Parliament on Wednesday passed the Banking Laws (Amendment) Bill, 2024, which allows bank account holders to have up to four nominees, with the Rajya Sabha approving it by a voice vote. Another change in the Bill relates to redefining of the term ‘substantial interest’ of a person in a bank. The limit is sought to be enhanced to ₹2 crore from the current ₹5 lakh, fixed almost six decades ago.

The Bill was passed by a voice vote in the Upper House.

The Lok Sabha had already approved the Bill. With the approval of the Rajya Sabha, it will now go to the President for assent. Post that, it will become law and various provisions will be implemented in accordance with the timeline prescribed under the new law.

With the help of the proposed law, deposit holders or locker holders can name up to four persons as nominees for payment of depositors’ money, release of contents of safety lockers and return of articles kept in safe custody with banks. Currently, only one nominee is permitted.

Unclaimed deposits

The change, however, is subject to conditions. In case of deposits, four nominees will be permitted with two options. Either, the primary holder(s) has to give priority to all four or mention the share of each nominee. In case of priority, the nomination shall be effective only in favour of one person in the order of priority.

The higher number of nominees for depositors’ money aims to reduce unclaimed deposits in banks. Over ₹45,000 crore worth of “unclaimed deposit” has been transferred by public sector banks to the Depositor Education and Awareness Fund between 2019-20 and 2024-25 (till December 31, 2024).

The Bill also seeks to increase the tenure of directors (excluding the chairman and whole-time director) in cooperative banks from 8 years to 10 years, so as to align with the Constitution (Ninety-Seventh Amendment) Act, 2011. Once it comes into effect, the amendment would allow a director of a Central cooperative bank to serve on the board of a State cooperative bank.

Bank fraud

It also seeks to give greater freedom to banks in deciding the remuneration to be paid to statutory auditors. The amendment is also aimed at redefining the reporting dates for banks for regulatory compliance to the 15th and last day of every month instead of the second and fourth Fridays.

Replying to a debate on the Bill, Finance Minister Nirmala Sitharaman said that even though NPAs have decreased drastically, the government is committed to taking stringent action against wilful defaulters. She said in the last five years, the Directorate of Enforcement has taken up around 112 cases related to bank fraud, including those pertaining to wilful defaulters.

Responding to issues regarding bad loans raised by opposition members during the discussion, the Finance Minister said, “Write-offs do not mean waiving off loans, and the banks will continue to make efforts to recover the funds.” She informed the House that PSBs posted the highest-ever profit of about ₹1.41 lakh crore in the last fiscal, and exuded confidence that the profitability would further increase in 2025-26.