RBI fines SBI for not following directions on employee pay

The regulator also carried out an examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission to arrive at its decision.

The Reserve Bank of India on Tuesday said that it has imposed a monetary penalty of Rs 2 crore on State Bank of India (SBI) for contravention of some provisions of the Banking Regulation Act, 1949, and specific directions of the RBI issued to the bank on payment of remuneration to employees in the form of commission.

“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,” the central bank said, without offering details of specific transactions.

The RBI said that 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 to the same resulted in a discovery of the contravention. The regulator also carried out an examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission to arrive at its decision.

After this, 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 and 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, the RBI came to the conclusion that the charges were substantiated and warranted imposition of monetary penalty.