New banking laws to come into effect from August 1

The Banking Laws (Amendment) Act, 2025, came into effect on August 1, 2025, with the goal of improving governance in the banking sector and better protecting depositors and investors. Notified on April 15, 2025, the Act introduces several key changes.

Key Provisions of the Act

• Audit and Governance: The Act aims to enhance audit quality in public sector banks (PSBs) by empowering them to offer remuneration to statutory auditors. This is intended to attract high-quality audit professionals and raise audit standards. The tenure of Directors (excluding the Chairperson and whole-time Directors) in cooperative banks has also been increased.
• Shareholding Threshold: The Act redefines the threshold for “substantial interest,” raising it from ₹5 lakh to ₹2 crore. This is a significant revision to a limit that had not changed since 1968.
• Investor Protection: PSBs are now permitted to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF). This aligns their practices with those followed by companies under the Companies Act, ensuring a consistent approach to managing unclaimed funds and securities.