Rajya Sabha Passes New Banking Rules : Depositors Can Add Upto Four Nominees

On Wednesday, the Rajya Sabha passed the Banking Laws (Amendment) Bill, 2024, which allows bank account holders to have up to four nominees, aiming to improve financial security for account holders and their families. The bill was approved through a voice vote in the upper house. Earlier, the Lok Sabha had passed the same bill in December 2024.

New Nomination Rules

Under the new provisions, account holders can now designate multiple nominees, making it easier for families to access funds after the account holder's demise. This update helps streamline the transfer process and reduces the burden of unclaimed deposits.

However, it is important to note that being nominated does not automatically grant ownership of the funds. A nominee only acts as a custodian responsible for receiving and managing the assets on behalf of the rightful heirs or beneficiaries.

The amendment now allows two nomination methods to facilitate fund distribution:

Simultaneous Nomination: Under this system, account holders can assign specific percentage shares to multiple nominees. This method ensures an equitable distribution of funds according to the depositor's wishes.

Successive Nomination: In this arrangement, nominees inherit the funds in a predefined sequence. If the primary nominee is unable or unwilling to claim the funds, the next nominee in line receives the entitlement.

Additionally, the amendment also revises nomination rules for bank lockers. Unlike deposit accounts, where both simultaneous and successive nominations are permitted, only successive nomination is allowed for bank lockers. This ensures that in case of disputes or uncertainties, lockers are passed down in a clear, structured manner.

Other Amendments

Apart from modifying nomination rules, the bill introduces several key amendments concerning cooperative banks. One of the major changes includes extending the tenure of directors (excluding the chairman and whole-time directors) in cooperative banks from 8 years to 10 years. This aligns with the provisions of the Constitution (Ninety-Seventh Amendment) Act, 2011, which aimed to improve governance in cooperative societies.

Additionally, once the amendment comes into effect, it will allow a director of a Central Cooperative Bank to serve on the board of a State Cooperative Bank, thereby improving coordination and decision-making within the banking sector.

The bill also grants banks greater autonomy in determining the remuneration of statutory auditors, ensuring that audit professionals are fairly compensated based on market standards.

Another significant change is the modification of regulatory reporting deadlines. Under the new framework, banks will be required to submit reports on the 15th and the last day of each month, replacing the existing deadlines set for the second and fourth Fridays.

Finance Minister Nirmala Sitharaman emphasized that these amendments will impact five key legislative acts governing India's banking sector:

1. The Reserve Bank of India Act, 1934
2. The Banking Regulation Act, 1949
3. The State Bank of India Act, 1955
4. The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
5. The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980

By introducing these amendments, the government aims to strengthen the regulatory framework, enhance governance in banking institutions, and provide better financial security for depositors.