New Banking Regulations

Introduction

Banking is a constantly growing and evolving sector today. In the past few years, banks embraced change, leading to a new world of faster digital metabolism and change in traditional business models. This onset of change has resulted in just the beginning of the revolutionary development in banking in the coming years.

Since weighing the benefits and risks of the digital banking world can be tough, the real challenge is to find the right balance between supporting innovation and protecting consumers. Several banking rules and regulations, including the Banking regulation act, have been introduced. If you are planning to enter the banking sector, it is crucial for you to understand the new banking regulations and how they are shaping the future of banking.

What is The Banking Regulation Act 1949?

The Banking Regulation Act is a legislation launched in India in 1949. It regulates all the banking firms in India. Passed as the Banking Companies Act in March 1949, it was changed to the Banking Regulation Act of 1949 in March 1966. In short, this act provides a framework to supervise and regulate commercial banking in India.

The Banking Regulation Act gives the Reserve Bank of India (RBI) the power to:

• License banks
• Regulates shareholding and voting rights of shareholders
• Supervise the appointment of boards and management
• Regulate bank operations
• Lay down instructions for audits
• Control mergers, liquidation, and a moratorium
• Impose penalties
• Issue directives in the interest of public good and on banking policy

Originally, the banking regulation act of 1949 applied only to banking companies. However, later in the year 1965, the law was amended. During this amendment, many changes were introduced which made it applicable to cooperative banks as well.

New Bank Rules and Regulations In The Digital World

The entire world is rapidly getting digitalised. The banking sector is no different. In today’s time, digital banking is present in almost every country over the world. New bank rules and regulations are introduced frequently to ensure smooth functioning and customer security in digitalised banking. The new banking rules and regulations vary from one country to another. There is no uniform algorithm or formula. Business models usually align with rules and regulations guiding banks in launching and developing schemes. Over the past few years, adopting and accepting new banking rules and regulations across geographies have allowed bank modernisation. Some new bank rules and regulations that brought ease to consumers in recent years include:

• Electric Know Your Customer (e-KYC) forms allow a completely digital onboarding and enables checking customers’ identities and conducting anti-money-laundering checks easier.
• e-signatures helped customers in validating most of their transactions remotely.
• The new ecosystem opportunities assisted nonbanks to compete and helped consumers to benefit from more personalised services.
• Cloud hosting was a great benefit for banks. It helped in infrastructure scaling, met the need of local regulations, and provided access to next-generation application architecture solutions.