Banking Laws Amendment Act 2025
The Banking Laws (Amendment) Act, 2025 came into effect on 1 August 2025. This act introduces key reforms across five major banking legislations. It aims to improve governance, protect depositors, and enhance audit quality in India’s banking sector. The amendments reflect the need to modernise rules that have remained unchanged for decades.
Scope and Notification
The Act includes 19 amendments spanning the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. The Central Government notified the implementation date as 1 August 2025 for several key sections. These provisions were formally notified in the Official Gazette in July 2025.
Redefinition of Substantial Interest
One major change is the increase of the threshold for ‘substantial interest’ from ₹5 lakh to ₹2 crore. This limit, fixed since 1968, determines eligibility for directorship in banks. The revision ensures that only stakeholders can influence bank governance. This modernisation aligns with the current economic environment and banking practices.
Director Tenure in Cooperative Banks
The Act aligns cooperative bank director tenures with the 97th Constitutional Amendment. The maximum tenure for directors, excluding chairpersons and whole-time directors, is extended from 8 years to 10 years. This change aims to provide stability and continuity in cooperative bank management.
Transfer of Unclaimed Amounts to IEPF
Public sector banks (PSBs) are now allowed to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF). This brings banking practices in line with the Companies Act. It improves management of dormant accounts and safeguards investor interests.
Empowering Statutory Auditors
The amendments empower PSBs to remunerate statutory auditors. This facilitates the hiring of skilled audit professionals. Enhanced audit quality will lead to better transparency and accountability in public sector banks.
Reporting and Regulatory Changes
The Act revises reporting timelines for banks to the Reserve Bank of India. Instead of weekly reporting every Friday, banks will now report on the last day of the fortnight, month, or quarter. This adjustment streamlines regulatory compliance and reduces reporting burdens.
Legislative Journey
The bill was introduced in August 2024 but faced delays in parliamentary discussion. It was passed by the Lok Sabha in December 2024 and approved by the Rajya Sabha in March 2025 with amendments. The Lok Sabha gave final approval in April 2025, making it law.
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