The Reserve Bank of India (RBI) has directed SBM Bank (India) Ltd to stop all transactions under the liberalised remittance scheme (LRS) with immediate effect.

The central bank passed this order after discovering ‘material supervisory concerns’.

The transactions are to stop till RBI passes further orders. "RBI, 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," the RBI said in a statement on Monday.

“This action is based on certain material supervisory concerns observed in the bank,” the statement added.

The RBI, however, did not state what exactly are the supervisory concerns surrounding the bank.

Under the LRS scheme, all Indian residents, 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  $25,000.

SBM Bank, a subsidiary of Mauritius-based SBM Holdings, started operations in India on 1 December 2018. It has 11 branches across the country.

In 2019, RBI imposed a Rs 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 was 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'.