Parliament on Wednesday passed the Banking Laws (Amendment) Bill, 2024, introducing key changes aimed at modernizing the banking sector. The Lok Sabha had earlier approved the Bill in December 2024. While the government hailed it as a progressive reform, opposition members raised concerns about its long-term implications.
During the Rajya Sabha debate, Finance Minister Nirmala Sitharaman emphasized the government's commitment to strengthening the banking sector. She highlighted a significant reduction in non-performing assets (NPAs) and reiterated that action against wilful defaulters remains a priority. She noted that the Enforcement Directorate (ED) has pursued over 912 bank fraud cases in the past five years. Addressing concerns over loan write-offs, she clarified that they do not amount to waivers, as banks continue recovery efforts.
A key amendment in the Bill raises the definition of "substantial interest" in a bank from ₹5 lakh, set nearly six decades ago, to ₹2 crore. It also extends the tenure of directors in cooperative banks (excluding the chairman and whole-time directors) from eight to ten years, aligning with the Constitution’s Ninety-Seventh Amendment Act, 2011. Additionally, banks now have greater flexibility in determining the remuneration of statutory auditors.
The Bill saw extensive discussion, with over 20 MPs participating in a four-hour debate. While the government maintains that these amendments will strengthen financial institutions, the opposition continues to call for a more detailed evaluation of their broader impact.
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