New Delhi (ABC Live): Banking Laws Amendment 2025: Published just hours before the implementation of the Banking Laws (Amendment) Act, 2025 on 1st August 2025, this ABC Live special report provides an in-depth review of India’s most significant banking reform in years.

The amendment affects governance, depositor protection, audit practices, and cooperative bank regulation. This critical report breaks down its implications using verified data, international benchmarks, and expert insights.

? What Is the Banking Laws (Amendment) Act, 2025?

The Banking Laws Amendment 2025, notified on 15th April 2025, introduces 19 changes across five major laws:

• Reserve Bank of India Act, 1934

• Banking Regulation Act, 1949

• State Bank of India Act, 1955

• Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980

Nine sections came into force on 1st August 2025 via Notification S.O. 3494(E).

? Key Goals of the Amendment

• Improve banking governance

• Strengthen depositor and investor protection

• Enhance audit quality in Public Sector Banks (PSBs)

• Align cooperative banks with the 97th Constitutional Amendment

? Data Analysis of Major Reforms

1. Substantial Interest Threshold Raised

• Old Limit (1968): ?5 lakh

• New Limit (2025): ?2 crore

• Inflation Adjustment: ?5 lakh in 1968 ? ?1.8 crore today

• Issue: Static cap; lacks inflation indexing

• Recommendation: Use a CPI-linked formula for future revisions

2. Cooperative Bank Director Tenure Increased

• Old Limit: 8 years

• New Limit: 10 years (excluding chairperson/whole-time directors)

• Data: 65% of directors serve over 6 years; 42% linked to political groups

• Global Benchmark: UK (9 years), Singapore (6 years with rotation)

3. Unclaimed Deposits to Be Transferred to IEPF

• Unclaimed Deposits (2024): ?42,272 crore

• Eligible for IEPF (PSBs): ?5,400 crore

• IEPF Recovery Rate: <2% (?712 crore recovered since inception)

• Gap: No Aadhaar-linked claim system; weak public awareness

4. Auditor Remuneration Autonomy in PSBs

• Average PSB Audit Fee/Branch: ?1.8 lakh

• Private Bank Average: ?3.6 lakh

• Bank Frauds (FY 2023–24): ?1.22 lakh crore; 62% from PSBs

• Impact: Higher fees could attract better auditors, butthey  must maintain independence

? Comparative Global Benchmarks

? Expert Commentary

“While the 2025 amendment marks a serious attempt to reform banking governance, it still suffers from incrementalism. What India needs is a complete overhaul of the public sector bank governance framework, including independent boards and market-linked performance metrics.”
— Advocate Dinesh Singh Rawat, Practising in the Supreme Court of India

? Pre-Implementation Concerns on Banking Laws Amendment 2025

• Partial Notification: Only 9 of 19 amendments are active from 1st August

• No RBI/SEBI Circulars Yet: No guidelines on director vetting, audit independence, or IEPF recovery

• No Digital Director Registry: Cooperative banks lack transparency systems

• Audit Quality Risks: No mandate for peer-reviewed audit evaluation in PSBs

? What’s Good in Banking Laws Amendment 2025

• Modern financial thresholds

• Better alignment of PSBs with the Companies Act

• Incentives for higher audit quality

? What’s Missing

• Dynamic threshold indexing

• Public-friendly IEPF claim portal

• Enforcement protocols for audit and governance

? Recommendations

• Implement a CPI-linked threshold review mechanism

• Launch an Aadhaar-enabled IEPF tracking portal

• Notify audit independence and rotation rules via RBI

• Create a national director database for all banks

Conclusion

The Banking Laws Amendment 2025 is a significant legislative step—but not a complete reform. It updates static laws, enhances transparency on paper, and aligns public sector banks with private-sector standards. However, without full implementation, digital tools, and institutional follow-through, the gains could remain limited.

Also, Read

IFSCA (TechFin) Regulations 2025: A Comparative Review