• The key provisions of the Banking Laws (Amendment) Act, 2025 will come into effect from August 1.

• The Banking Laws (Amendment) Act, 2025 was notified on April 15. 

• It contains a total of 19 amendments across five legislations — the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, State Bank of India Act, 1955 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980.

• The provisions of sections 3, 4, 5, 15, 16, 17, 18, 19, and 20 of the Banking Laws (Amendment) Act, 2025 shall come into force from August 1.

Key provisions:

• The Banking Laws (Amendment) Act, 2025 seeks to improve governance standards in the banking sector, ensure enhanced protection for depositors and investors, improve audit quality in public sector banks, and increase the tenure of directors (other than the chairperson and whole-time directors) in cooperative banks. 

• The amendment allows public sector banks (PSBs) to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF), bringing them in line with practices followed by companies under the Companies Act.

• It also empowers PSBs to offer remuneration to statutory auditors, facilitating the engagement of high-quality audit professionals and enhancing audit standards.

• The notification has enhanced the threshold of ‘substantial interest’ from Rs 5 lakh to Rs 2 crore.

• The threshold of ‘substantial interest’ has been amended after 1968.

• The notification aligns director tenures in cooperative banks with the 97th Constitutional Amendment by increasing the maximum tenure from eight years to 10 years, excluding the chairperson and whole-time director.

• The implementation of these provisions marks a significant step towards strengthening the legal, regulatory, and governance framework of the Indian banking sector.

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