New banking reforms from Nov 1: Four nominees, better governance, stronger depositor rights

The Ministry of Finance on October 23 announced a significant reform in the banking sector — allowing customers to nominate up to four individuals in their bank accounts starting November 1, 2025. 

The move, the ministry said, is aimed at ensuring “uniformity, transparency, and efficiency in claim settlement across the banking system.” The change comes as part of the Banking Laws (Amendment) Act, 2025, which was notified on April 15, 2025, and introduces 19 amendments across key financial legislations, including the Reserve Bank of India Act, 1934, and the Banking Regulation Act, 1949. 

New nomination rules 

Under the new provisions, depositors will have the flexibility to choose between simultaneous and successive nominations: 

• Simultaneous nomination: A depositor may nominate up to four individuals, specifying their percentage share — ensuring the total adds up to 100%. 
• Successive nomination: In this case, nominees are ranked in order, and the next nominee becomes eligible only upon the death of the one higher up in sequence. 

For lockers and articles kept in safe custody, banks will permit only successive nominations. 

To operationalise the reform, the Finance Ministry will soon notify the Banking Companies (Nomination) Rules, 2025, prescribing the process and standard forms for creating or cancelling multiple nominations. 

Broader governance & Transparency push 

The 2025 amendment is designed to strengthen governance and depositor protection in the banking ecosystem. Besides improving nomination facilities, it aligns various aspects of banking law with evolving regulatory standards and customer needs. 

The law also: 

• Enables public sector banks (PSBs) to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF) — in line with company law practices. 
• Empowers PSBs to determine remuneration for statutory auditors, ensuring higher audit quality. 
• Raises the ‘substantial interest’ threshold from ₹5 lakh to ₹2 crore — the first such revision since 1968. 
• Aligns the tenure of directors in cooperative banks with the 97th Constitutional Amendment, extending the maximum term (excluding chairpersons and whole-time directors) from 8 to 10 years. 

According to the Finance Ministry, the broader intent behind the amendment is to enhance governance standards, depositor confidence, and investor protection, while modernising operational frameworks across Indian banks.