By Vikram Kilpady
The loss of a near and dear one is devastating enough. The tragedy is compounded by the various offices one has to visit for multiple things starting from the death certificate at the municipal office. This, in itself, is not a tedious procedure. But the next lot—insurance claims and transfer of sums in bank accounts—are.
Recently, the Lok Sabha passed the Banking Laws Amendment Bill, 2024, which seeks to make this troubling issue simpler. Among the highlights of this Bill was the change in law on the number of nominees that could be attached to one bank account. Whereas the law previously allowed only one nominee to a bank account, the Bill now makes it possible to nominate four nominees.
Of course, the account holder will have to specify whether the nominees will enjoy successive or simultaneous nomination. In successive nomination, the nominees can be ranked in order of importance and, failing their accessing the account, the next in line gets priority. For instance, the second nominee can withdraw only if the first nominee is not available. The third nominee will get to be the beneficiary if the second is not available. So it passes on to the fourth. In simultaneous nominees, the nomination will be effected in line with proportions declared by the account holder when making the nominations.
Introducing the Bill, Finance Minister Nirmala Sitharaman said the Banking Laws (Amendment) Bill, 2024, will introduce changes that would enhance customer convenience as well as beef up governance in the sector. Listing changes to be made by the Bill, she said 19 amendments will be made to the Bill which has amended the Reserve Bank of India Act, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and its subsequent iteration in 1980. The amendments to the Banking Regulation Act had been announced by the finance minister in her 2023-24 Budget.
The need for adding more nominees for both convenience and safety was felt, reports quoting government sources said, especially after the pandemic left a trail of casualties across homes in the country that had many unable to access their parents’ or siblings’ accounts.
Another push for more nominees came from homes which were divided between widows and their estranged in-laws after the death of the husband. In some cases which hit the headlines, parents of a martyred soldier had alleged that their son’s widow had got all the compensation since she was the nominee for the provident fund. They had further claimed that the daughter-in-law had made off with the gallantry medal conferred on their son. Army authorities stepped in to deny these wild claims, saying the insurance money was divided between the widow and her in-laws, and the widow got the provident fund sum as decided by the soldier.
Similar cases of parents or widows being ignored were reported across the country. Fraught relations obviously had something to do with the need for such amendments.
The other amendments listed in the Bill are important as well, despite the nominee question getting primetime display and coverage.
Under the Banking Regulation Act, the substantial interest a person can hold in a company for directorship had been set at shares of over Rs 5 lakh or 10 percent of the paid-up capital of the company, whichever is less. This could have been held by an individual, the spouse or minor child or jointly. The Amendment Bill changes this limit to Rs 2 crore, taking into account the limit that had been set some 60 years ago.
The Bill amended the Banking Regulation Act to increase the term of directors to a period of 10 years for co-operative banks. Earlier, the Act barred the director of a co-operative bank (apart from its chairman or whole-time director) from holding office for more than eight years consecutively.
The amendment to the RBI Act came under the definition of a fortnight which has been changed from a Saturday to the second Friday following (with both days included), to the first day of each month to the 15th day or the 16th day to the last day of the month. This was effected towards the maintenance of average daily balance with the RBI as cash reserves, which is based on the average of balances with banks at the close of business of each day of a fortnight.
The definition of a fortnight has also been changed for non-scheduled banks which need to maintain cash reserves with the RBI under the Banking Regulation Act.
Earlier, the Banking Regulation Act prohibited a director on a bank’s board from serving on the board of another bank and would not be applicable on RBI-appointed directors. The Bill now extends this exemption to the director of a central co-operative bank, if and when such persons are elected to the board of a state cooperative bank in which he or she is a member.
Another issue was the settlement of unclaimed amounts. The SBI Act, and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980, had cleared transferring unpaid or unclaimed dividend to an unpaid dividend account. If money in the account remains unpaid or unclaimed for seven years, it is then moved to the Investor Education and Protection Fund (IEPF), as per PRSIndia.org.
The 2024 Bill widened the ambit of funds that can be transferred to the IEPF. These include: “(i) shares for which dividend has not been paid or claimed for seven consecutive years, and (ii) any interest or redemption amount for bonds which is unpaid/ unclaimed for seven years. Any person whose shares or unclaimed/unpaid money is transferred to IEPF can claim the transfer or refund.”
The Bill has also liberated auditors of banks from RBI and governmental control. Currently, the remuneration paid to auditors of banks is set by the RBI in consultation with the centre. The Bill now allows banks to decide what they should pay their auditors.
The Bill was due to come up for passing in the Rajya Sabha, but the Opposition move to table a no-confidence motion against Rajya Sabha Chairman and Vice-President Jagdeep Dhankhar could end up delaying it. The winter session has seen the Opposition and the Treasury benches ranged against each other over the Gautam Adani indictment in the United States as well as barbs over the Congress leadership’s proximity to billionaire George Soros.
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