Reserve Bank of India (RBI) fined Rs 1 crore on the country’s largest lender, State Bank of India, for holding shares in borrowing companies over 30% of the paid-up share capital of these companies. companies.
Subsection (2) of the Banking Regulation Act 1949 states that no bank may own shares in a company, whether as pledgee, mortgagee or absolute owner, an amount greater than 30 percent of the paid-up share capital of this company. company or thirty percent of its own share capital and reserves.
“Statutory inspections for the prudential assessment (ISE) of the bank were carried out by RBI with reference to its financial situation as of March 31, 2018 and March 31, 2019 and the review of risk assessment reports, inspection and all related correspondence relating to the same, revealed, among other things, a violation of paragraph (2) of article 19 of the law insofar as the bank held, as a pledgee, shares of borrowing companies in an amount greater than thirty percent of the paid-up share of the capital of these companies, ”the central bank said.
The RBI sent a notice to the bank asking why a fine should not be imposed on it and after reviewing the bank’s response, it came to the conclusion that the charge of contravening the law was valid and justified the ‘Imposition of a fine on the bank.
This is the second time in as many months that the regulator has imposed a financial penalty on SBI. Last month, the RBI imposed a penalty of Rs 1 crore on the bank for failing to comply with instructions issued by the central bank regarding the classification and reporting of fraud by commercial banks.
This action is based on breaches of regulatory compliance and is not intended to rule on the validity of any transaction or agreement concluded by the bank with its customers, “the RBI said in a press release.