RBI fines BoB Rs 5 lakh for CRR & SLR breach

The Reserve Bank of India (RBI) today slapped a fine of Rs 5 lakh on 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.

RBI said it came to the conclusion that the violation was substantiated on careful examination of the bank's submissions and accordingly imposed a monetary penaltyon BoB, for violation of provisions of the 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 the 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%) with RBI as CRR and invest a part of the deposits (currently 25%) 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 show cause 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.

A C Mahajan, executive director of BoB, said: "It was a honest and unintentional mistake and there was no malafide intention. After RBI brought this lacunae to our notice, we corrected the mistake".