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The Reserve Bank of India on Monday has directed the SBM Bank (India) Ltd to stop all Liberalised Remittance Scheme (LRS) transactions with immediate effect till further notice.

The RBI under sections 35A and 36(1)(a) of the Banking Regulation Act, 1949, has directed SBM Bank to stop LRS transactions.

"The Reserve Bank of India has today, in exercise of its powers under sections 35A and 36(1)(a) of the Banking Regulation Act, 1949, directed SBM Bank (India) Ltd to stop, with immediate effect, all transactions under Liberalised Remittance Scheme (LRS) till further orders. This action is based on certain material supervisory concerns observed in the bank," said RBI in its release.

Under the LRS scheme, all resident individuals, including minors, are allowed to freely remit funds abroad up to $ 2,50,000 per financial year. The Scheme was introduced on February 4, 2004, with a limit of USD 25,000.

SBM Bank is a subsidiary of Mauritius-based SBM Holdings. It started its operations on 1 December 2018.

In 2019, RBI had imposed a 3 crore penalty on SBM Bank (India) for non-compliance of regulatory norms by SBM Bank (Mauritius), which amalgamated with the former in November 2018.

The penalty has been imposed for non-compliance by SBM Bank (Mauritius) with certain provisions of directions issued by the central bank on 'Time-bound implementation and strengthening of SWIFT - related operational controls' and 'Cyber Security Framework in Banks', the Reserve Bank of India (RBI) said in a statement.

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