RBI issues a monetary penalty of Rs 1 crore to SBI

SBI allegedly contravened the 30% cap on holdings placed under the Banking Regulation Act

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RBI issues a monetary penalty of Rs 1 crore to SBI

The RBI (Reserve Bank of India) has foisted a monetary penalty on the nation’s biggest lender, State Bank of India of Rs 1 crore for having shares in companies that are borrowers of an amount that exceeds 30% of the paid-up share capital of those certain companies.

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Sub-section (2) of the Banking Regulation Act, 1949, states that no banking shall have shares in any company, whether as pledgee, absolute owner, or mortgagee, of an amount that exceeds 30% of the paid-up share capital of that certain company or 30% of its own paid-up share reserve or capital.

“The statutory Inspections for Supervisory Evaluation (ISE) of the bank was conducted by RBI with reference to its financial positions as on March 31, 2018 and March 31, 2019 and the examination of the risk assessment reports, inspection report and all related correspondence pertaining to the same, revealed, inter-alia, contravention of sub-section (2) of section 19 of the Act to the extent the bank held shares in borrower companies, as pledgee, of an amount exceeding thirty percent of paid-up share capital of those companies”, stated by the Central Bank.

The Reserve Bank of India (RBI) placed a notice to the bank seeking why a penalty shouldn’t be imposed and upon hearing the reply of the bank, the conclusion came was that the charge of breach of the Act was sustained and imposed a monetary penalty on State Bank of India.

This is the second time in as several months that the regulator has placed a monetary penalty on State bank of India. Last month, RBI placed a penalty of Rs 1 crore on SBI for not obeying with directions placed by the central bank in relation to fraud classification and not stating by commercial banks.

“This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”, the RBI stated in a statement.

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RBI issues a monetary penalty of Rs 1 crore to SBI
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SBI allegedly contravened the 30% cap on holdings placed under the Banking Regulation Act
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THE POLICY TIMES
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