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Public Sector Banks to Transfer Unclaimed Shares and Dues to Investor Education Fund Starting August 1
News
31 July 2025
2 min read
246
The Government of India has notified key amendments under the Banking Laws (Amendment) Act, 2025, introducing a significant reform that allows public sector banks (PSBs) to transfer unclaimed shares, bond redemption dues and related interest amounts to the Investor Education and Protection Fund (IEPF) starting August 1, 2025. This change brings PSBs into alignment with practices already mandated under the Companies Act for private and public corporations.
In addition, the amendments empower PSBs to pay remuneration to statutory auditors—an effort aimed at elevating audit standards and enabling these institutions to engage more qualified audit professionals with greater independence.
Another notable change raises the threshold defining “substantial interest” from ₹5 lakh to ₹2 crore—a move that updates a benchmark that had remained unchanged since 1968. This revision reflects evolving financial scales and strengthens governance safeguarding against conflict-of-interest scenarios.
For cooperative banks, the amendments align director tenure provisions with the 97th Constitutional Amendment by extending the maximum tenure (excluding chairpersons and whole-time directors) from 8 years to 10 years. This is expected to enhance leadership continuity and institutional stability.
Though the Act was enacted on April 15, 2025, these specific modifications will be operational from August 1, 2025, following publication of the gazette notification dated July 29, 2025. The amendments form part of 19 changes across five key laws, including the RBI Act, 1934; Banking Regulation Act, 1949; State Bank of India Act, 1955; and Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.
The government asserts that implementing these reforms will strengthen the legal, regulatory and governance foundations of the Indian banking sector, fostering improved deposit and investor protection, audit quality, and alignment with global best practices
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