Reserve Bank of India has recently imposed a monetary penalty of Rs. 2 crore on SBI for contravention of certain provisions of Section 10 of the Banking Regulation (BR) Act, 1949 and RBI’s specific directions issued to the bank on payment of remuneration to employees in the form of commission.
Especially, 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.
As per a central bank statement, “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.”
RBI added 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 contravention of the provisions of the Act.
In furtherance to the same, a formal notice was issued to the bank advising it to show cause as to why the 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 read.