RBI vide its press release dated 16th March, 2021 has announced imposition of penalty of Rs.20 million on the largest bank in India viz. State Bank of India for non compliance with certain directions.
The fine has been imposed for non contravention of section 10 (1) (b) (ii) of the Banking Regulation Act, 1949. This section pertains to payment of commission to certain employees of the bank. Apparently banks are not allowed to pay remuneration via the mode of commission to its employees under this section.
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.