The Reserve Bank of India (RBI) has brought the State Bank of Sikkim under its regulatory purview. The bank only operates within Sikkim and is wholly-owned by the state government. The bank is also responsible to handle the treasury function of the State. With this regulatory purview, the ownership structure of the bank will not be changed and will be regulated by the RBI on a par with other banks.
Purpose: To protect the interest of depositors.
Why is the State Bank of Sikkim not under the RBI?
i.The bank was established in 1968 under the State Bank of Sikkim Proclamation, 1968.
ii.But in 1975, Sikkim was merged with India, by which the bank was given a special status under Article 371 F of the constitution.
i.Consequent to which, the Banking Regulation Act 1949 and the Companies Act do not extend to Sikkim or the residents of Sikkim.
ii.The people are not subject to Income Tax like the rest of Indian Citizens.
i.The basic safety measures for depositors like provisions of the Deposit Insurance and Credit Guarantee Corporation(DICGC) that offers an insurance cover of up to approximately 5 lakh does not apply to this bank.
ii.So in the event of a crisis, there is no fallback available.
i.The State Government transactions are carried out by RBI as per the agreement between RBI and with state governments in terms of section 21 A of RBI Act 1934.
ii.As of now, such agreements exist between RBI and all the State Governments except Government of Sikkim
RBI will expand the role of State Bank of Sikkim by which it can offer a variety of services to the north-eastern states, which have low banking penetration.
Recent Related News:
On November 26, 2020 Reserve Bank of India(RBI) advised Lakshmi Vilas Bank(LVB) to fully write off the Series VIII, Series IX and Series X Basel-III complaint tier -2 bonds worth Rs 318.20 crore, before its amalgamation with DBS Bank India Ltd(DBIL) comes into effect from the appointed date i.e., 27th November 2020. It is to be noted that it is the 1st time a Tier II bond is being written off and so RBI has set a priority to the proposed write off.
About State Bank of Sikkim:
Head Office– Gangtok,Sikkim
MD– Phurba Wangdi Bhutia
Chairman– Dal Bahadur Gurung