The Banking Laws (Amendment) Act, 2025 will take effect on August 1

Current Context: Effective August 1, 2025, the Banking Laws (Amendment) Act, 2025 introduces major reforms across India’s banking sector.

• Governance Boost: Director tenure in cooperative banks (excluding Chairperson/Whole-time Directors) extended from 8 to 10 years, aligning with the 97th Constitutional Amendment.
• Depositor Protection: Public sector banks can now transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF).
• Audit Quality: PSBs are empowered to offer remuneration to statutory auditors, enhancing audit standards.
• Substantial Interest Redefined: Threshold raised from ₹5 lakh to ₹2 crore, modernizing a limit unchanged since 1968.

These changes span 19 amendments across five key legislations, including the RBI Act, Banking Regulation Act, and SBI Act.

Question:

Q.1 What change has been made to the definition of ‘Substantial Interest’ in the Banking Laws (Amendment) Act, 2025?
a) Threshold reduced to ₹1 lakh
b) Threshold kept unchanged at ₹5 lakh
c) Threshold raised to ₹1 crore
d) Threshold raised from ₹5 lakh to ₹2 crore

Answer: d) The definition of ‘Substantial Interest’ had not been updated since 1968. But the Threshold raised from ₹5 lakh to ₹2 crore.