RBI imposes Rs 1 cr penalty on SBI for violating Banking Regulation Act

The Reserve Bank of India on Friday imposed a penalty of Rs 1 crore on India’s largest lender State Bank of India for holding surplus shares in the borrower companies as pledgee. 

According to the press statement of the central bank, “SBI held shares in borrower companies, as pledgee, of an amount exceeding 30 per cent of paid-up share capital of those companies.”

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The RBI had conducted a statutory Inspection for Supervisory Evaluation (ISE) on the SBI with reference to its financial positions as on March 31, 2018, and March 31, 2019, it said. 

The central bank had also issued a show-cause notice regarding the same stating why a penalty should not be imposed on it for contravention of the provisions of the Banking Regulation Act, 1949. 

Post considering the bank’s reply to the notice and oral submissions made during the personal hearing of the bank, the RBI came to the conclusion that the charge of contravention of the aforesaid provisions of the Act was substantiated.

The central bank also said a warranted imposition of monetary penalty on the bank, to the extent of contravention of the aforesaid provisions of the Act, the press statement said. 

The state-owned bank shares slipped over 4 per cent to 470.5 per share on the BSE as compared to a 2.87 per cent decline in the S&P BSE Sensex. The stock had been a weak the whole session on Friday since open, it had made a 52-week high of Rs 542.20 per share on November 03, 2021.