In a regulatory move, the Reserve Bank of India (RBI) on Monday (September 25) imposed a penalty of Rs 1.30 crore on the State Bank of India (SBI) for its failure to comply with specific directives issued by the apex bank.

It is for non-compliance with certain directions issued by RBI on Loans and Advances – Statutory and Other Restrictions and Guidelines on Management of Intra-Group Transactions and Exposures.

This penalty — exercised under the authority vested in the RBI as outlined in Section 47A(1)(c) in conjunction with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949 — reflects regulatory concerns regarding SBI's adherence to certain directives.

Point to note — the fine is rooted in deficiencies in regulatory compliance and not a judgement on the validity of any transaction or agreement between the bank and its customers.

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The origins of this penalty can be traced back to the Statutory Inspection for Supervisory Evaluation (ISE 2021) conducted by the RBI, with reference to SBI's financial standing as of March 31, 2021.

The examination of the Risk Assessment Report/Inspection Report for ISE 2021 unearthed instances of non-compliance by SBI in relation to the aforementioned directives.

This includes the sanctioning of a term loan to a corporation without conducting adequate due diligence on project viability and revenue streams. Additionally, the SBI did not adhere to intra-group exposure limits as it failed to consider the intra-day limit granted to its group entity when computing intra-group exposure limits.

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Following these findings, a notice was served to SBI, prompting the bank to explain why a penalty should not be imposed for non-compliance with RBI directives.

After careful consideration of SBI's response to the notice, along with oral submissions made during a personal hearing and examination of additional submissions, the RBI concluded that the charge of non-compliance was substantiated, warranting the imposition of a monetary penalty on the bank.

Shares of State Bank of India ended at Rs 594.10, down by Rs 4, or 0.67 percent, on the BSE.

(Edited by : Shoma Bhattacharjee)

First Published:Sept 25, 2023 7:51 PM IST