A new chapter has begun in the history of Indian banking from August 1, 2025. Major changes made under the Banking Laws (Amendment) Act, 2025, have now come into effect in the country. Through this act, the government has implemented several important provisions regarding the transparency, accountability, and investor protection of the banking sector. Most importantly, the limit of ‘Substantial Interest’ has been increased from ₹5 lakh to ₹2 crore, which has been changed for the first time since 1968.
Which Laws Have Been Amended?
The Banking Laws (Amendment) Act, 2025, was notified on April 15, but the implementation of some of its key provisions from August 1 was announced recently on July 29.
Under these amendments, a total of 19 changes have been made to five major banking laws. These include:
- Reserve Bank of India Act, 1934
- Banking Regulation Act, 1949
- State Bank of India Act, 1955
- Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
- Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
Sections Implemented from August 1
According to the notification issued by the government on July 29, Sections 3, 4, 5, 15, 16, 17, 18, 19, and 20 of the Act have been implemented from August 1, 2025. These sections relate to important issues such as banking operations, management, audit arrangements, and investor protection.
Biggest Change: Now ₹2 Crore for ‘Substantial Interest’
Until now, the limit of ₹5 lakh was fixed in the case of banking companies under the definition of ‘Substantial Interest,’ which has been changed to ₹2 crore after 57 years. This change is considered a major step towards bringing transparency in the management and shareholding matters of banking companies.
This change will affect all cases where the rules are examined regarding a significant stake of a person or entity in a bank.
Tenure of Directors of Cooperative Banks Increased
A major reform has also been made in cooperative banks. Now, the tenure of directors other than the Chairperson and Full-Time Director has been increased from 8 years to 10 years. This provision has been made in line with the 97th Amendment of the Constitution, so that stability and continuity in operations can be maintained in cooperative institutions.
It is expected that the benefits of experience and leadership will be available for a longer period in the cooperative banking system due to this change.
Permission to Transfer Amount Stuck in IEPF
Another major decision has been taken that now public sector banks have got permission to directly transfer the amount of unclaimed shares, interest, and bond redemption to the Investor Education and Protection Fund (IEPF).
Earlier, this facility was limited to only a few private and mutual fund companies, but now the government has decided to extend it to all public banks. With this, the government will be able to use the unclaimed amount of investors for investment education and protection.
Governance Structure to be Strengthened
The focus of all these changes is to make the Indian banking structure more transparent, accountable, and in the interest of investors. Whether it is a matter of governance, investor protection, or the accountability of bank management, all these provisions will directly affect these areas.
Earlier, there was a long-standing demand in the banking sector to change some old laws and definitions, which the government has now fulfilled.
Step Towards Legal Strengthening in the Banking Sector
Banking experts have long been calling this move by the government necessary. It had become necessary to strengthen the Indian banking system amidst the prevailing global economic conditions and technological changes.
After the implementation of this amended law, there will be clarity in the rules in the operation of banks, investors and depositors will get better protection, and banks will also get more freedom to work.
