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Major provisions of the Banking Laws (Amendment) Act, 2025 will come into effect from August 1, 2025, according to a government notification issued this week. The changes mark a significant push to strengthen governance standards, improve depositor protection and raise audit quality across India’s banking sector.
The Ministry of Finance, through Gazette Notification S.O. 3494(E) dated July 29, 2025, has notified the commencement of sections 3, 4, 5, 15, 16, 17, 18, 19 and 20 of the legislation, which was enacted on April 15, 2025.
The Banking Laws (Amendment) Act, 2025 introduces a total of 19 amendments across five major laws—the Reserve Bank of India Act, 1934; Banking Regulation Act, 1949; State Bank of India Act, 1955; and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.
Among the key reforms, the definition of ‘substantial interest’ has been significantly revised by raising the threshold from Rs 5 lakh to Rs 2 crore—a limit that had remained unchanged since 1968.
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To align with the 97th Constitutional Amendment, the tenure of directors (excluding chairpersons and whole-time directors) in cooperative banks has been increased from eight years to 10 years, ensuring greater consistency in board-level appointments.
Public sector banks (PSBs) will now be allowed to transfer unclaimed shares, interest amounts and bond redemption proceeds to the Investor Education and Protection Fund (IEPF), aligning PSBs with provisions applicable to companies under the Companies Act. Another important measure enables PSBs to offer remuneration to statutory auditors—an effort aimed at enhancing the quality and independence of audits.
The government stated that the implementation of these provisions represents a decisive move towards modernising the regulatory and governance framework of Indian banking and bringing it in line with evolving global best practices.
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