Bill providing up to 4 nominees for bank account tabled – Banking Laws (Amendment) Bill 2024

Bill providing up to 4 nominees for bank account tabled – Banking Laws (Amendment) Bill 2024

Sub : Eco

Sec: Capital MARKET

• Introduction of Multiple Nominees:
  • The Bill introduces a provision allowing account holders to nominate up to four nominees for their bank accounts and lockers.
  • It also provides for simultaneous and successive nominations, offering more flexibility and protection for depositors and their beneficiaries.
• Governance and Reporting Improvements:
  • The Bill aims to improve governance standards in banks, ensuring consistent reporting to the Reserve Bank of India (RBI).
  • It seeks to enhance the quality of audits in Public Sector Banks, thereby strengthening the financial system’s integrity.
• Protection for Depositors and Investors:
  • The Bill includes provisions to safeguard the interests of depositors and investors, including the transfer of unclaimed dividends, shares, and bond interests to the Investor Education and Protection Fund (IEPF).
  • Individuals will be allowed to claim transfers or refunds from the IEPF, ensuring that unclaimed assets are protected.
• Extension of Director Tenure in Cooperative Banks:
  • The Bill proposes to increase the tenure of directors (other than the chairperson and whole-time directors) in cooperative banks, likely aimed at improving the stability and governance of these institutions.

 Amendments to Various Acts:

• The Bill seeks to amend several key pieces of legislation, including:
  • RBI Act, 1934
  • Banking Regulation Act, 1949
  • State Bank of India Act, 1955
  • Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980

    Opposition and Debate:

• Opposition members opposed the Bill, arguing that the power to legislate on cooperatives rests with state governments.
• Other members raised concerns about the Bill amending multiple legislations simultaneously, suggesting that the amendments could have been made through administrative decisions.
• Government’s Response:
  • Finance Minister defended the Bill, clarifying that it does not infringe on the state’s powers regarding cooperatives, as it only addresses aspects related to banking and emphasized the necessity of these amendments, citing legal precedents and the need to strengthen the relationship between the Banking Regulation Act and Cooperative Banks.
• Investor Education and Protection Fund (IEPF)
  • The Investor Education and Protection Fund (IEPF) is a government-established fund in India aimed at promoting investor awareness and protecting the interests of investors.

Purpose and Objectives of IEPF:

• Investor Awareness and Education:
  • The primary purpose of the IEPF is to educate and inform investors about their rights and responsibilities. It funds programs, seminars, and other initiatives to spread awareness about investment safety and financial literacy.
• Protection of Investor Interests:
  • The IEPF is designed to safeguard the interests of investors, particularly in situations where companies have failed to pay dividends, or where shares, deposits, and debentures remain unclaimed for a long period.
• Utilization of Unclaimed Amounts:
  • Funds that are unclaimed for seven years or more, such as dividends, matured deposits, or debentures, are transferred to the IEPF. These funds are used to carry out investor education and protection activities.

Key Functions of the IEPF:

• Handling Unclaimed Amounts:
  • The IEPF manages unclaimed dividends, matured deposits, shares, and other financial instruments that have been transferred from companies. Investors or their heirs can claim these amounts from the IEPF.
• Investor Compensation:
  • In cases of fraudulent or unlawful acts by companies, the IEPF can be used to compensate investors, subject to certain conditions.
• Funding Investor Education Initiatives:
  • The IEPF finances projects, research, and initiatives that contribute to investor education and awareness.

IEPF Authority:

• The IEPF Authority was established under the provisions of the Companies Act, 2013, and is responsible for the administration of the IEPF. The Authority manages the funds, processes claims, and oversees the educational initiatives.

Claiming Unclaimed Funds:

• Investors or their legal heirs can claim their unclaimed funds by filing an application with the IEPF Authority. The process typically involves:
  • Filing a claim online through the IEPF portal.
  • Submitting necessary documents to verify the claim.
  • The IEPF Authority then reviews the claim, and if everything is in order, the amount is refunded to the claimant.