New Delhi: India has kicked off a major overhaul of its banking architecture with the implementation of the Banking Laws (Amendment) Act, 2025, a reform package aimed at tightening governance, modernising compliance, and strengthening depositor safeguards across the financial system. The changes, notified in two phases between August and November 2025, amend five core legislations governing the country’s banking ecosystem.
The government said the law marks a “significant stride towards modernising India’s financial architecture,” bringing banking norms in line with a rapidly expanding digital economy and deepening financial inclusion. “The Act enhances depositor and investor protection by promoting customer convenience through improved nomination facilities,” the Finance Ministry said in the release.
One of the headline changes is a shift to a modernised nomination framework, allowing depositors to nominate up to four individuals with percentage-wise allocations. Successive nomination has also been enabled for safety lockers and articles in safe custody, aimed at preventing disputes and reducing delays in claim settlements.Huge sums remain stuck across banks due to the absence of nominees, the ministry noted, adding that the updated rules are expected to “cut delays and provide faster access to families.”
The Act also raises the long-standing threshold for defining “substantial interest” in a banking company — from the 1968-era ₹5 lakh to ₹2 crore — a change intended to align governance standards with present-day financial realities.
In cooperative banks, the maximum tenure for directors (other than whole-time directors and chairpersons) has been increased from eight to ten years, aligning these entities with the 97th Constitutional Amendment, which mandates more democratic governance structures.
Public sector banks (PSBs) have been granted more autonomy on auditor remuneration, a move expected to improve audit quality and help attract more qualified professionals. Additionally, PSBs can now transfer unclaimed dividends, shares, and redemption amounts to the Investor Education and Protection Fund, bringing them in line with listed companies under the Companies Act.
The Act synchronises several statutory reporting timelines with modern accounting cycles. Requirements earlier tied to “last Friday” or “alternate Fridays” have now been standardised to the last day of the month or last day of the fortnight, a shift aimed at reducing manual work and supporting automation.
The ministry said the amendments will “fortify the legal, regulatory and governance structure of the Indian banking sector” while supporting India’s broader push toward a secure, transparent and technology-driven financial system.