Starting August 1, 2025, several important changes under the Banking Laws (Amendment) Act, 2025 will come into effect. These changes aim to improve how banks are governed, make audits in public sector banks stronger, and provide better protection to depositors and investors.
The Banking Laws (Amendment) Act, 2025, which was notified on April 15, brings updates to five major banking laws in India: the Reserve Bank of India Act, 1934; the Banking Regulation Act, 1949; the State Bank of India Act, 1955; and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.
Among the key provisions coming into force are sections 3, 4, 5, 15, 16, 17, 18, 19, and 20. These changes were officially announced through a government notification on July 29, 2025.
One of the major changes is the redefinition of what qualifies as ‘substantial interest’ in a banking company. The old limit of ₹5 lakh, which had not been revised since 1968, has now been increased to ₹2 crore. This aims to make regulations more relevant to today’s financial environment.
Another key update involves cooperative banks. The maximum term for directors in these banks (excluding the chairperson and whole-time directors) will now be 10 years, up from 8 years. This aligns with the 97th Constitutional Amendment and helps bring cooperative banking practices in line with national standards.
Public sector banks will now be allowed to transfer unclaimed shares and funds from bond redemptions to the Investor Education and Protection Fund (IEPF), just like private companies do under the Companies Act. This move brings consistency across the banking and corporate sectors.
To improve audit quality, public sector banks will also be able to offer competitive remuneration to their statutory auditors. This is expected to attract more qualified professionals and raise the standard of auditing in these institutions.
These changes mark a significant step in strengthening the legal and operational foundation of India’s banking system, ensuring more robust governance, better transparency, and stronger protection for depositors.