Key Provisions of Banking Laws (Amendment) Act, 2025 to Be Enforced from August 1

The Government of India has officially announced that key provisions of the Banking Laws (Amendment) Act, 2025 will be enforced from August 1, 2025. This development, detailed in a gazette notification issued on July 29, 2025, represents a notable step forward in reforming the country’s banking regulations.

According to the Ministry of Finance, Sections 3, 4, 5, 15, 16, 17, 18, 19, and 20 of the Act are set to come into force on the mentioned date, making them legally applicable from August onwards.

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

Legislative Journey

The Banking Laws (Amendment) Act, 2025 received Presidential assent on April 15, 2025, and was officially published on the same date. It introduces amendments to a series of longstanding banking legislations, namely:

• The Reserve Bank of India Act, 1934

• The Banking Regulation Act, 1949

• The State Bank of India Act, 1955

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

These amendments are part of the government’s broader effort to modernize banking governance, enhance compliance, and align bank operations with the Companies Act, 2013.

Key Sections Coming into Effect from August 1, 2025

Sections 3, 4, 5: Updates to the Banking Regulation Act, 1949

• The minimum paid-up capital requirement for banks is being raised from ₹5 lakh to ₹2 crore, significantly enhancing the capital strength of Indian banks.

• The tenure for directors in co-operative banks has been increased to a maximum of 10 years.

• Provisions related to the representation of co-operative bank directors at the state level have also been clarified, improving governance and transparency.

Sections 15 and 16: Amendments to the State Bank of India Act, 1955

• SBI must now transfer unclaimed dividends, unpaid interest, unredeemed shares, and matured deposits that have remained inactive for seven years to the Investor Education and Protection Fund (IEPF) as per the Companies Act, 2013.

• The appointment of auditors will now follow updated guidelines under the Companies Act, and SBI itself will determine the audit fees.

Sections 17 and 18: Amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970

• The same IEPF transfer and auditor appointment rules will now apply to nationalised banks such as PNB, Bank of India, and others established under this act.

Sections 19 and 20: Updates for Banks Covered Under the 1980 Act

• These changes apply to nationalised banks covered under the Banking Companies Act of 1980, aligning them with modern governance and compliance standards, particularly regarding auditing norms and investor protection measures.

Why These Amendments Matter

Strengthening Capital and Compliance Norms

The changes introduced in the notified sections aim to modernize India’s banking sector and ensure stronger oversight, especially for co-operative and nationalised banks.

"They raise the minimum paid-up capital for banks from ₹5 lakh to ₹2 crore."

This increase is crucial for improving the financial health and stability of smaller banking entities.

Governance in Line with the Companies Act

Bringing SBI and other public sector banks under the auditing provisions of the Companies Act, 2013 will result in:

• Greater transparency

• Uniformity across financial institutions

• Stronger investor confidence

"SBI’s auditors will be appointed under updated Companies Act provisions, and the bank will fix their fees."

Protecting Investor Interests Through the IEPF

The Act ensures that unclaimed dividends, interest, and shares are not left idle with banks indefinitely but are moved to the Investor Education and Protection Fund (IEPF).

“SBI must now transfer any unclaimed dividends, unpaid interest or redemption amounts, and shares with unpaid dividends for seven years to the Investor Education and Protection Fund (IEPF) under the Companies Act, 2013.”

This helps prevent misuse and enables rightful claimants to retrieve their dues through an established mechanism.

Conclusion

The enforcement of key provisions of the Banking Laws (Amendment) Act, 2025 from August 1 signifies a critical step toward modernising India's banking framework. The amendments bring older laws in line with contemporary governance standards, raise financial thresholds, and ensure better protection for depositors and shareholders.

From enhancing capital adequacy to transferring unclaimed investor funds and improving audit protocols, the new provisions are expected to have a far-reaching impact. As the financial sector continues to evolve, these updates aim to ensure that Indian banks operate in a more transparent, accountable, and investor-friendly manner.