SBI held shares in the borrower companies of an amount exceeding 30 percent of the paid-up share capital of those companies. According to the Sub-section (2) of the Banking Regulation Act, 1949, no banking company can hold shares in any company, as pledgee, mortgagee, or absolute owner, of an amount exceeding 30 percent of the paid-up share capital of that company or thirty percent of its own paid-up share capital and reserves. The Reserve Bank of India (RBI) today imposed a monetary penalty of Rs 1 crore on the country’s largest lender State Bank of India (SBI) For holding shares in the borrower companies of an amount exceeding 30 percent of the paid-up share capital of those companies.
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The RBI imposed the penalty for the contravention of sub-section (2) of section 19 of the Banking Regulation Act, 1949, according to its statement on Friday, November 26. Sub-section (2) of the Banking Regulation Act, 1949, states that no banking company can hold shares in any company, as pledgee, mortgagee or absolute owner, of an amount exceeding 30 percent of the paid-up share capital of that company or thirty percent of its own paid-up share capital and reserves.
Subsequently, the Reserve Bank of India issued a notice to the State Bank of India, asking why the penalty should not be imposed on it for the contravention of the directions. On Friday, November 26, shares of State Bank of India settled 4.09 percent lower at Rs 470.50 apiece on the BSE. State Bank of India opened at Rs 486.75, registering an intraday high of Rs 487.60 and an intraday low of Rs 467.25 during the trading session today.
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