The government moved amendments to the banking laws on Friday, allowing account holders to propose up to four nominees either successively or simultaneously (with the proportion of their shares specified), in an effort to bring more clarity to the inheritance of bank deposits.
The Banking Laws (Amendment) Bill, 2024, introduced by minister of state for finance Pankaj Chaudhary in the Lok Sabha on behalf of Union finance minister Nirmala Sitharaman, aims to protect depositors’ interests and improve the governance standards of financial institutions, including cooperatives that act as banks.
According to an official who requested anonymity, the Bill ensures consistent reporting by banks to the Reserve Bank of India (RBI), enhances protection for depositors and investors, improves audit quality in public sector banks, and increases the tenure of directors (other than chairperson and whole-time director) in cooperative banks.
The official added that the Bill offers greater flexibility and convenience for depositors and their legal heirs by including provisions for simultaneous and successive nominations, particularly concerning deposits, articles in safe custody, and safety lockers.
The Banking Regulation Act of 1949 will be amended to replace the words “one person” with “one or more persons not exceeding four, either successively or simultaneously” in sub-section (1) of section 45ZA. The Bill stipulates that when a nomination is made successively in favour of more than one person, it shall be effective only in favour of one person in the specified order of priority. In the case of a simultaneous nomination in favour of multiple persons, the nomination shall be effective in proportion to the declared percentage.
{{/usCountry}}The Banking Regulation Act of 1949 will be amended to replace the words “one person” with “one or more persons not exceeding four, either successively or simultaneously” in sub-section (1) of section 45ZA. The Bill stipulates that when a nomination is made successively in favour of more than one person, it shall be effective only in favour of one person in the specified order of priority. In the case of a simultaneous nomination in favour of multiple persons, the nomination shall be effective in proportion to the declared percentage.
{{/usCountry}}In the latter scenario, nomination will be limited to four or fewer people and will need to explicitly state the proportion of amount of deposit in percentage in favour of each nominee. If, however, one of the multiple nominees dies, their proportion will be treated as having not been assigned a nominee.
Some Opposition members opposed the introduction of the Bill, arguing that it subsumed amendments in five Acts, 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, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. Sougata Ray, the Trinamool Congress MP from Dum Dum (AITC), questioned the approach of amending four different laws in a single Bill, deeming it unnecessary, superfluous, and against the people’s interest.
Sitharaman defended the government’s approach, citing past examples and emphasising the prudence of amending related Acts simultaneously instead of repeating the process through separate legislation. She assured Congress leader Manish Tiwari that the Bill does not infringe upon the powers of states, as it covers only those cooperatives that act as banks and not primary agricultural cooperative societies. Sitharaman explained that the route taken was necessary when dealing with related functions of banks, whether under cooperative societies or banks.