RBI slaps ₹1.73 crore penalty on SBI for violations in loan disbursals, customer protection

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.73 crore on State Bank of India (SBI), the country’s largest lender, for violations in loan disbursals, customer protection in unauthorised electronic transactions, and improper handling of current accounts.

"The Statutory Inspection for Supervisory Evaluation (ISE 2023) of the bank was conducted by the RBI with reference to its financial position as on March 31, 2023. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for its failure to comply with the said directions," stated RBI in a press release issued on May 9.

The penalty has been imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.

After reviewing SBI’s written and oral submissions, the RBI concluded that the bank issued a bridge loan to an entity against pending receivables from the central or state government, breaching regulatory norms. It also failed to credit customers’ accounts (through shadow reversal) within 10 working days of being notified of unauthorised electronic banking transactions; did not compensate affected customers within the stipulated 90-day period from the date of receiving complaints; and opened and maintained certain current accounts in violation of the existing RBI regulations.

The central bank clarified that this action is strictly related to compliance deficiencies and does not cast judgment on the legitimacy of any transactions or contracts between SBI and its customers. The penalty is also without prejudice to any further regulatory action that the RBI may undertake.

"The 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. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by the RBI against the bank," the RBI stated.

SBI is yet to issue a formal statement in response to the RBI penalty order, dated April 29.