Banking Laws (Amendment) Act Brings Major Governance, Compliance Changes

New Delhi, Dec 5 (KNN) The Banking Laws (Amendment) Act, 2025 has introduced a series of reforms aimed at strengthening governance, improving depositor protection and enhancing audit quality across the banking sector. 

The amendments, notified in two phases on August 1 and November 1, also harmonise reporting timelines for more consistent compliance with Reserve Bank of India (RBI) norms.

Rules Updated and Simplified

The Act modernises nomination rules by allowing depositors to name up to four nominees through simultaneous or successive options, enabling smoother claim settlements. 

It also updates the definition of ‘substantial interest’ from the decades-old Rs 5 lakh limit to Rs 2 crore to strengthen governance scrutiny.

Reforms and Changes for Banks

In co-operative banks, the maximum tenure for directors, excluding chairpersons and whole-time directors, has been increased from 8 to 10 years, aligning governance structures with the 97th Constitutional Amendment. 

Public sector banks have been given the authority to fix auditors’ remuneration and transfer unclaimed shares and interest to the Investor Education and Protection Fund, bringing them in line with practices under the Companies Act.

Sectoral impact

The government said the amendments will strengthen the overall regulatory framework and enhance depositor convenience. 

They will also improve governance oversight, particularly in co-operative banks, support better audit quality in PSBs, and create a more transparent and efficient reporting ecosystem.

Impact on MSMEs

Simpler reporting and better audit standards will reduce compliance burden for MSME lenders. 

Stronger co-operative bank governance may improve credit access, while clearer, easier nomination rules can boost confidence among MSME depositors. 

(KNN Bureau)