On August 9, 2024, the government took a significant step towards banking sector reform by introducing the Banking Law Amendment Bill in the Lok Sabha. A lot of people are curious to know about the bank privatization – did the government introduce anything about privatization?
The Banking Laws (Amendment) Bill, 2024, is now in the hands of the Parliamentary Standing Committee, according to PRS Legislative Research. This bill, introduced in the Lok Sabha by Minister of State for Finance Pankaj Chaudhary, is set to bring several important changes to the banking sector. Let’s break down what this bill means and what you need to know.
Key Changes Proposed by the Bill
- More Nominees for Your Bank Account:
One of the main highlights of this bill is the proposal to allow up to four nominees per bank account, up from the current limit of one. This change aims to give customers more flexibility in choosing who can inherit their bank accounts in case something happens to them. - Redefining ‘Substantial Interest’:
The bill also suggests updating the definition of ‘substantial interest’ for individuals holding directorships in banks. The current limit of ₹5 lakh has been in place for nearly 60 years. The new proposal would increase this limit to ₹2 crore, reflecting changes in the financial landscape and making it more relevant to today’s standards. - Banking on Auditor Freedom:
Banks will get more leeway in deciding how much they pay their statutory auditors. This change is meant to give banks the flexibility to negotiate auditor fees more freely, which could help streamline operations and potentially reduce costs. - Changing Reporting Dates:
The bill proposes altering the reporting dates for banks to the 15th and the last day of each month. This is a shift from the current schedule of the second and fourth Fridays of the month. The new dates are intended to simplify compliance and reporting processes for banks.
Legislative Background
The bill aims to amend several key laws, including:
- The Reserve Bank of India Act, 1934
- The Banking Regulation Act, 1949
- The State Bank of India Act, 1955
- The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
- The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
This move follows an announcement made by the Finance Minister in the 2023-24 Budget speech, which outlined the need for these updates.
Recent Legislative Sessions
On August 9, 2024, the Lok Sabha, which is the lower house of Parliament, was adjourned sine die—meaning the house was dismissed without setting a date for reassembly. This came one session before the originally scheduled end on August 12. The Rajya Sabha, the upper house, also ended its session on the same day, earlier than planned.
Privatization and Disinvestment Update
In a related note, while the bill proposes significant changes, it does not address the privatization of government banks. According to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the government is required to maintain a 51% stake in public sector banks. The new amendment does not alter this requirement. This means that the public sector banks will not be privatized as of now.
Currently, the central government holds a 45.5% stake in IDBI Bank, and LIC holds over 49%. There were previous plans to sell a substantial portion of these stakes, including 30.5% from the government and 30.2% from LIC. However, progress on this disinvestment has stalled over the past 18 months, and the government has even postponed the disinvestment of other entities like BPCL.
Conclusion
The Banking Laws (Amendment) Bill, 2024, brings forward some promising changes that could affect how you manage your bank accounts and how banks operate. While it doesn’t tackle privatization directly, the updates reflect an ongoing effort to modernize and streamline banking regulations. Keep an eye out for further developments as this bill progresses through Parliament.
