The Banking Laws (Amendment) Act, 2025, officially came into force on 1 August 2025, ushering in significant reforms across India’s key banking legislations. Designed to modernise outdated regulations, the Act introduces 19 amendments across five foundational laws, aiming to improve governance, ensure depositor protection, strengthen audit mechanisms, and align banking practices with contemporary financial realities.
The Act amends the Reserve Bank of India Act, 1934; the Banking Regulation Act, 1949; the State Bank of India Act, 1955; and both the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980. The changes were officially notified in the Government Gazette in July 2025, with key provisions taking effect from 1 August 2025.
One of the most notable reforms is the redefinition of ‘substantial interest’, a critical factor in determining eligibility for directorship in banks. The threshold has been revised from ₹5 lakh (set in 1968) to ₹2 crore, ensuring that only significant stakeholders can influence governance—an update reflecting the growth in financial benchmarks over the decades.
The Act also aligns the director tenure in cooperative banks with the 97th Constitutional Amendment. Directors, excluding chairpersons and whole-time directors, can now serve up to 10 years—up from the previous limit of 8 years—enhancing stability in leadership and management continuity.
In a major shift, public sector banks are now permitted to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF). This measure harmonises banking norms with the Companies Act and ensures better handling of dormant accounts, benefiting investors.
Further, PSBs are empowered to independently remunerate statutory auditors, enabling the hiring of competent professionals to enhance audit quality and reinforce transparency.
Banks are no longer required to report data to the RBI every Friday. Instead, reporting will now occur on the last day of the fortnight, month, or quarter. This streamlining reduces administrative burdens while ensuring regulatory compliance remains intact.
Originally introduced in August 2024, the bill saw parliamentary debates and was passed by the Lok Sabha in December 2024. After Rajya Sabha clearance in March 2025 and final Lok Sabha approval in April 2025, the Act was enacted, marking a crucial step toward robust and responsive banking legislation in India.
