The Banking Laws (Amendment) Act 2025

In one line

The first substantial amendment of Indian banking law in five years raised a threshold fixed in 1968, allowed four nominees instead of one, and moved the reporting fortnight off Friday.

In the wording a student can write in an exam: the Banking Laws (Amendment) Act, 2025, Act 16 of 2025, received the President's assent on 15 April 2025 and amends five statutes, 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; it was brought into force in two stages, the governance and audit provisions from 1 August 2025 and the nomination provisions from 1 November 2025.

Why an amending Act gets a chapter of its own

Because MU's topic is "Recent Trends", and this is the most recent trend there is.

And because an amending Act is easy to answer badly. A candidate who lists nineteen amendments has written a table of contents. What is wanted is the pattern: what problems Parliament was addressing, and whether the answers are adequate.

Three themes run through the Act, and organising an answer around them is what separates a good one.

Correcting figures that inflation had made absurd, of which the "substantial interest" threshold is the outstanding example.

Improving depositor and investor protection, principally through nomination and through unclaimed amounts.

And modernising machinery, moving reporting dates off a Victorian Friday and giving public sector bank boards a power they should always have had.

Theme one: a threshold fixed in 1968

The change. Section 3 of the amending Act provides that in section 5(ne)(i) of the Banking Regulation Act, for the words "five lakhs of rupees" shall be substituted the words "two crore rupees or such other amount as may be notified in the Official Gazette by the Central Government".

What section 5(ne) does. It defines "substantial interest", and chapters 80 and 520 showed why that matters: section 20 forbids a bank to lend to a company in which one of its directors holds a substantial interest, and the definition therefore fixes how wide that prohibition is.

Why the change was overdue, and this is the fact worth remembering. The figure of five lakh rupees was fixed by the social control amendment of 1968, which chapter 160 works, and it was never revised until 2025. For fifty-seven years inflation quietly widened section 20's net, so a shareholding that Parliament in 1968 regarded as substantial had become trivial, and the prohibition caught relationships it was never aimed at.

And the drafting fixes the recurring problem. The new words allow the Central Government to notify a different amount, so the threshold need never be frozen again by requiring an Act of Parliament to move it.