The Indian embassy in the USA has said the US government has declined to interfere in the penalty slapped on State Bank of India (SBI) by the US Federal Reserve on the issue of violation of Federal Deposit Insurance Corporation rules last year.
The embassy has told the finance ministry that it had taken up the matter with the US government to clear SBI's name on the instructions of the Indian government here.
But it says Washington has informed the embassy that the Federal Reserve is an independent institution and it will not be possible for the government to interfere in the decisions taken by it.
The finance ministry has said the government has already instructed the bank to pay the fine and said the move by the embassy, if successful, would have just cleared the air about the US operations of the bank.
Since the SBI acts as the lead manager for foreign currency loans by the government, the penalty of $7.5 million slapped on it would feature in the prospectus for any future government loans.
The embassy had approached the American government to request the Federal Reserve to clear the name of SBI from the charges and also waive the penalty, especially as the bank has already complied with all the requirements imposed on it. But, faced with the refusal, the embassy has asked the finance ministry to take up the matter afresh at a higher political level.
The US Federal Reserve had issued a cease and desist order on SBI's US operations in October last year, suspecting it of being used as a conduit for money laundering operations.
It had also imposed a fine on the bank for apparent violation of FDIC rules and regulations. But the order had cited no specific cases of wrong doings by SBI in its US operations.
From November 2001, the bank was prohibited from accepting any non resident Indian funds for transfer outside the US unless the customer had an account with the bank there and the bank had verified the identity of the remitter with proper due diligence.