BoB fined for lower CRR, SLR

The Reserve Bank of India (RBI) today fined government-owned Bank of Baroda (BoB) for maintaining lower cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in violation of the Banking Regulation Act.

During the course of annual financial inspections, RBI had observed that BoB had netted the items representing internal and external liabilities in the inter-branch accounts, resulting in under-estimation of outside liabilities for the purpose of computation of net demand and time liabilities (NDTL) during April 1999 to March 2002.

The bank reported lower NDTL (deposits) and as a result maintained less than required CRR and SLR during the period in violation of the provisions of section 24 of the Act.

Banks have to maintain cash balances (currently 5 per cent) with RBI as CRR and invest a part of the deposits (currently 25 per cent) in government securities as SLR.

RBI said the bank was advised to submit revised returns for the relevant period, but the bank sought exemption from submission of revised returns, on grounds of basic constraint of inadequacy of accounting system in vogue at the relevant time.

The central bank then issued a showcause notice to the bank, in response to which the bank submitted its written reply. The chairman of the bank was also granted a personal hearing with the RBI.

BoB executive director A C Mahajan said "It was a honest and unintentional mistake and there was no malafide intention."