State Bank of Sikkim: Now Under RBI Purview

State Bank of Sikkim: Now Under RBI Purview

State Bank of Sikkim: Now Under RBI Purview

(Business Standard)

Context:

  • Recently, the Reserve Bank of India has brought the State Bank of Sikkim under its regulating umbrella.
  • The bank enjoyed a special status under Article 371F due to which the Banking Regulation Act of 1949 and Companies Act of 2013 does not extend to Sikkim.

Background:

  • The state of Sikkim was made an associate state in 1974 and later the Thirty-sixth Amendment Act of 1975, made it an integral part of the Indian Union in 1975.
  • Since the bank was established prior to this, it still follows the old laws as per Article 371F of the Constitution.
  • The central direct taxes are also not extended to Sikkim. As per Sec 10(26AAA) any income originating to the Sikkimese through any means in the State or through interest on securities are not included in the total income. 
  • The people are also not liable to pay Income Tax. The RBI had limited agreement to administer the public debt of the bank.

About the State Bank of Sikkim:

  • It is a state-owned bank. The HQ of the bank is in Gangtok.
  • It serves under the arbitration of the State of Sikkim. It handles the banking services as well as the treasury functions of the State Government. 
  • The bank is an autonomous body and was established in the year 1968 five years before Sikkim was made a part of India in 1973 for the first time.
  • It was not monitored by the Reserve Bank of India, unlike other banks until February 21, 2021. This regulatory amendment will not change the structure of bank ownership.

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