The date 01/08/2025 will see the enforcement of major provisions of the Banking Laws (Amendment) Act, 2025, constituting a stride in governance and regulation reforms in PSBs, cooperative institutions, and some private entities.
Having been passed on 15 April 2025, this Amendment Act consists of 19 amendments to five crucial statutes concerned with 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, 1970 and 1980.
Sections 3, 4, 5, and 15 to 20 of the Act became operative from 29 July 2025, according to the Gazette Notification S.O. 3494(E) issued by the Ministry of Finance, Government of India. Major structural changes were brought about.
The threshold of ‘substantial interest’ to qualify for directorship in cooperative banks has been hugely increased, from ₹5 lakh (set a few decades ago) to ₹2 crore, to modernize governance and align with prevailing financial realities.
The Public Sector Banks shall rotate their statutory auditors every three years, subject to the approval of the Reserve Bank of India. These amendments will also allow the Public Sector Banks to pay their auditors for the first time, under modifications from the preceding norms; such reforms aim at strengthening audit quality and transparency at the institution-level.
The DICGC (Deposit Insurance and Credit Guarantee Corporation) will have access to real-time information so that it can take quick action to protect small depositors from bank distress.
PSBs shall now be empowered to transfer unclaimed financial assets, such as shares, interest, and maturing amount redemption, to the Investor Education and Protection Fund (IEPF), thus bringing them at par with their corporate counterparts under the Companies Act.
The Act includes reforms to board composition norms within cooperative banks, enhancing regulatory supervision and standardizing reporting obligations to reinforce depositor and investor confidence.
These reforms symbolize a decisive shift toward modernising governance across India’s banking sector, particularly for public and cooperative ownership institutions. By raising entry thresholds, enforcing audit rotation, and improving depositor protection, the government aims to enhance transparency, accountability, and public trust.
For auditors, compliance teams, and bank management, August 1 is a critical compliance deadline. Systems must be aligned for auditor rotations, return schedules, governance structures, and depositor‑tracking mechanisms.
These changes occur against the backdrop of global banking reforms, such as the Basel III ‘endgame’ reforms, which commenced on 1 July 2025 and introduced stricter capital and risk-weight standards internationally. While the Amendment Act addresses India-specific governance and depositor safeguards, global compliance pressures underscore the need for holistic regulatory readiness.
Bottom Line: From 1 August 2025, the Banking Laws (Amendment) Act will introduce significant structural and operational governance reforms across India’s banking landscape. Institutions should expedite compliance efforts - particularly around auditor engagements, board composition, depositor insurance, and handling of unclaimed assets - to align with new legal mandates.