The country's central bank RBI has imposed a penalty to the tune of Rs. 1 crore on SBI- the country's leading PSU Bank for flouting sub-section (2) of section 19 of the Banking Regulation Act, 1949 (the Act).
In a statement, the central bank said, "This fine has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with sections 46 (4) (i) and 51 (1) of the Act". This action is based on 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, added the RBI.
"The Statutory Inspections for Supervisory Evaluation (ISE) of the bank was conducted by the 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 per cent of paid-up share capital of those companies", added RBI.
In accordance with the RBI, a notice was served to SBI that advised the bank to show cause as to why the monetary penalty should not be charged from it for breaching the earlier specified provisions of the Act.
"After considering the bank's reply to the notice, oral submissions made during the personal hearing, and additional submissions made by the bank, RBI came to the conclusion that the charge of contravention of the aforesaid provisions of the Act was substantiated and warranted imposition of monetary penalty on the bank, to the extent of contravention of the aforesaid provisions of the Act", said the RBI release.