The Banking Laws (Amendment) Act 2025
Why it Matters?
The Banking Laws (Amendment) Act, 2025, effective from 1st August 2025, introduces major reforms in governance, audit, and regulatory norms for public sector and cooperative banks.
What You Should Know?
It amends five banking laws:
Reserve Bank of India Act, 1934
Banking Regulation Act, 1949
State Bank of India Act, 1955
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
Key Objectives:
Strengthen governance mechanisms in Indian banks.
Enhance protection for depositors and investors.
Improve audit quality and transparency in Public Sector Banks (PSBs).
Align cooperative bank governance with constitutional provisions.
Key Provisions:
The monetary threshold for ‘substantial interest’ has been raised from ₹5 lakh to ₹2 crore, revising a limit unchanged since 1968.
The maximum tenure for directors (excluding the chairperson and whole-time directors) in cooperative banks has been increased from 8 years to 10 years.
Public Sector Banks (PSBs) are now allowed to transfer unclaimed shares, interest amounts, and bond redemption proceeds to the Investor Education and Protection Fund (IEPF), as per practices under the Companies Act, 2013.
Public Sector Banks (PSBs) can now offer remuneration to statutory auditors, allowing them to engage high-quality audit professionals and improve audit standards.