The Banking Laws (Amendment) Act, 2025, aimed at improving governance standards in the banking sector and ensuring enhanced protection for depositors and investors.
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NEW DELHI — The Banking Laws (Amendment) Act, 2025, aimed at improving governance standards in the banking sector and ensuring enhanced protection for depositors and investors, will come into effect from August 1, the Finance Ministry said on Wednesday.
The Act, notified on April 15 this year, also seeks to 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 provisions of the Act aim to redefine the threshold of "substantial interest" from INR 5 lakh to INR 2 crore, revising a limit that has remained unchanged since 1968.
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Further, these provisions align Director tenures in cooperative banks with the 97th Constitutional Amendment by increasing the maximum tenure from 8 years to 10 years (excluding the Chairperson and whole-time Director).
Public sector banks will now be permitted 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. The amendments also empower public sector banks to offer remuneration to statutory auditors, facilitating the engagement of high-quality audit professionals and enhancing audit standards.
The implementation of these provisions marks a significant step towards strengthening the legal, regulatory, and governance framework of the Indian banking sector, the ministry statement added.
The Banking Laws (Amendment) Act, 2025 contains a total of 19 amendments across five legislations—the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980.
The Central government notified August 1, 2025 as the date on which the provisions of sections 3, 4, 5, 15, 16, 17, 18, 19, and 20 of the Banking Laws (Amendment) Act, 2025 (16 of 2025) shall come into force, as notified through the Gazette Notification dated July 29, 2025.