The Parliament on Wednesday passed the Banking Laws (Amendment) Bill, 2024, with the Rajya Sabha approving it by a voice vote. Notably, the Lok Sabha had passed the Banking Laws (Amendment) Bill in December 2024.

The new Bill allows bank account holders to have up to four nominees among other provisions.

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Another change in the bill relates to redefining of term ‘substantial interest’ of a person in a bank. The limit is sought to be enhanced to Rs 2 crore from the current Rs 5 lakh, which was fixed almost six decades ago.

Union Finance Minister Nirmala Sitharaman in the Parliament 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 912 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 public sector banks posted the highest ever profit of about Rs 1.41 lakh crore in the last fiscal, and exuded confidence that the profitability would further increase in 2025-26.

The Finance Minister said the amendments will impact five different acts, making it unique. “It is also unique as eight teams worked on amendments, ensuring all necessary changes to achieve the budget speech’s purpose,” she said.

Once into effect, the amendment would allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank.

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.

In the case of lockers, the Bill says only simultaneous nomination is allowed. This is already being used in insurance policies and other financial instruments.

The Bill also seeks to improve governance standards, provide consistency in reporting by banks to the Reserve Bank of India, ensure better protection for depositors and investors, improve audit quality in public sector banks, bring customer convenience in respect of nominations and provide an increase in the tenure of the directors in co-operative banks.