**Banking Laws Amendment Act, 2025: Key Provisions Effective August 1, 2025**
The Ministry of Finance has announced that key provisions of the Banking Laws Amendment Act, 2025, will come into effect on August 1, 2025. The Act, notified on April 15, 2025, encompasses 19 amendments across five key legislations: 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.
The primary objectives of the Banking Laws Amendment Act, 2025 are to enhance governance standards within the banking sector, provide greater protection for depositors and investors, improve the quality of audits in Public Sector Banks (PSBs), and align cooperative bank director tenures with constitutional norms.
The provisions taking effect on August 1, 2025, as per Gazette Notification S.O. 3494E dated July 29, 2025, specifically address:
* **Substantial Interest Threshold:** Redefining the threshold of substantial interest from ₹5 lakh to ₹2 crore, revising a limit that has been in place since 1968.
* **Cooperative Bank Director Tenure:** Aligning director tenures (excluding the chairperson and whole-time directors) in cooperative banks with the 97th Constitutional Amendment, increasing the maximum tenure from 8 years to 10 years.
* **Unclaimed Funds:** Permitting PSBs to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF), mirroring practices under the Companies Act.
* **Statutory Auditor Remuneration:** Empowering PSBs to offer appropriate remuneration to statutory auditors, facilitating the engagement of qualified professionals and improving audit quality.
The implementation of these provisions is intended to significantly strengthen the legal, regulatory, and governance framework of the Indian Banking Sector.
Key Entities Referenced
Banking Laws Amendment Act, 2025: A legislative act aimed at enhancing bank governance, safeguarding depositors, improving PSB audits, and aligning cooperative banks with constitutional norms.
Reserve Bank of India Act, 1934: One of the legislations amended by the Banking Laws Amendment Act, 2025.
Banking Regulation Act, 1949: One of the legislations amended by the Banking Laws Amendment Act, 2025.
State Bank of India Act, 1955: One of the legislations amended by the Banking Laws Amendment Act, 2025.
Banking Companies Acquisition and Transfer of Undertakings Act, 1970: One of the legislations amended by the Banking Laws Amendment Act, 2025.
Banking Companies Acquisition and Transfer of Undertakings Act, 1980: One of the legislations amended by the Banking Laws Amendment Act, 2025.
Investor Education and Protection Fund IEPF: A fund to which public sector banks will transfer unclaimed shares, interest and bond redemption amounts.
Delhi: The location from which the press release was issued.
Ministry of Finance
Key Provisions of the Banking Laws (Amendment)
Act, 2025 to come into effect from 1st August 2025
Banking Laws (Amendment) Act, 2025 aims to
enhance bank governance, safeguard depositors,
improve PSB audits, and align cooperative banks
with constitutional norms
Posted On: 30 JUL 2025 7:56PM by PIB Delhi
The Banking Laws (Amendment) Act, 2025 was notified on 15th April 2025, containing a total of 19
amendments across five legislations—the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949,
State Bank of India Act, 1955 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
and 1980.
The Banking Laws (Amendment) Act, 2025 seeks to improve governance standards in the banking sector,
ensure enhanced protection for depositors and investors, improve audit quality in public sector banks, and
increase the tenure of directors (other than the chairperson and whole-time directors) in cooperative banks.
The Central Government notified 1st August 2025 as the date on which the provisions of sections 3, 4, 5,
15, 16, 17, 18, 19, and 20 of the Banking Laws (Amendment) Act, 2025 (16 of 2025) shall come into force, as
notified through Gazette Notification S.O. 3494(E) dated 29th July 2025.
i. The above-mentioned provisions aim to redefine the threshold of ‘substantial interest’ from ₹5
lakh to ₹2 crore, revising a limit that has remained unchanged since 1968.
ii. Further, these provisions align director tenures in cooperative banks with the 97th Constitutional
Amendment by increasing the maximum tenure from 8 years to 10 years (excluding the
chairperson and whole-time director).
iii. Public sector banks (PSBs) will now be permitted to transfer unclaimed shares, interest, and bond
redemption amounts to the Investor Education and Protection Fund (IEPF), bringing them in
line with practices followed by companies under the Companies Act. The amendments also
empower PSBs to offer remuneration to statutory auditors, facilitating the engagement of
high-quality audit professionals and enhancing audit standards.
The implementation of these provisions marks a significant step towards strengthening the legal, regulatory,
and governance framework of the Indian Banking Sector.
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NB/AD
(Release ID: 2150371)