The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 1 crore on the State Bank of India (SBI), for violating subsection (2) of section 19 of the Banking Regulation Act, 1949. SBI held shares in the borrower companies of an amount exceeding 30 per cent of the paid-up share capital of those companies.
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What is Sub-section (2) of the Banking Regulation Act, 1949?
As per 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 per cent of the paid-up share capital of that company or thirty per cent of its own paid-up share capital and reserves.
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