Tag: Banking Regulation Act

RBI imposes ₹2 crore penalty on SBI

Banking & Finance

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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2 crore on State Bank of India (SBI) for contravention of certain provisions of Section 10 of the Banking Regulation (BR) Act, 1949 and the central bank’s specific directions issued to the bank on payment of remuneration to employees in the form of commission.

Specifically, RBI has referred to contravention of section 10 (1) (b) (ii) of the BR Act, whereby no banking company shall employ or continue the employment of any person whose remuneration or part of the remuneration takes the form of commission or of a share in the profits of the company.

“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,” per a central bank statement.

This penalty has been imposed in exercise of powers vested with RBI under the provisions of BR Act, it added.

RBI said the statutory inspection of the bank with reference to its financial position as on March 31, 2017 and March 31, 2018 and the Risk Assessment Reports (RARs) pertaining thereto, and examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission, revealed, inter alia, contravention of the provisions of the Act and aforesaid specific directions issued by RBI.

In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act/ specific directions issued by RBI.

After considering the bank’s replies to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty, the statement said.

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RBI sets up panel to suggest steps for strengthening, consolidating urban co-operative banks, BFSI News, ET BFSI

Banking & Finance

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Mumbai: The Reserve Bank on Monday set up a committee to draw a vision document for strengthening urban co-operative banks (UCBs) and exploring the potential of consolidation in the sector. The committee, to be headed by former RBI Deputy Governor N S Vishwanathan, will suggest “effective measures for faster rehabilitation and resolution of Urban Cooperative Banks (UCBs) and also assess their potential for consolidation in the sector.”

The panel will “draw up a vision document for a vibrant and resilient urban co-operative banking sector having regards to the Principles of Cooperation as well as depositors’ interest and systemic issues,” said the terms of reference of the committee which will be required to submit its report to the RBI in three months.

The eight-member panel, including former chairman of Nabard Harsh Kumar Bhanwala, will also review the current regulatory and supervisory approach and recommend suitable measures to strengthen the sector, taking into account recent amendments to the Banking Regulation Act, 1949.

As per the terms of reference of the committee, it will “take stock of the regulatory measures taken by the Reserve Bank and other authorities in respect of UCBs and assess their impact over the last five years to identify key constraints and enablers, if any, in fulfilment of their socio-economic objective.”

Among other things, the committee will consider the need for differential regulations and examine prospects to allow more leeway in permissible activities for UCBs with a view to enhancing their resilience.

As part of the Statement on Developmental and Regulatory Policies released along with the Monetary Policy Statement on February 5, the Reserve Bank has announced setting up of an Expert Committee on UCBs to examine the issues and to provide a road map for strengthening the sector, leveraging on the recent amendments to Banking Regulation Act, 1949.

Following the amendment all urban cooperative banks and multi-state cooperative banks have come under the supervision of the Reserve Bank of India.

There are 1,482 urban cooperative banks and 58 multi-state cooperative banks having about 8.6 crore depositors with total savings deposit of about Rs 4.85 lakh crore.



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