'Withdraw deposits, halt transactions': Karnataka govt orders closure of accounts in SBI, PNB; Here's why
In a decisive move, the Karnataka government has ordered all state entities to cease financial transactions with SBI and PNB due to unresolved issues over Rs 25 crore in fixed deposits. This action, led by Chief Minister Siddaramaiah, aims to recover funds amid alleged financial irregularities involving the banks.
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FollowIn a bold move, the Karnataka government has ordered all state departments, public sector undertakings, universities, and related organizations to immediately cease financial transactions with the State Bank of India (SBI) and Punjab National Bank (PNB). This decision, approved by Chief Minister Siddaramaiah, stems from serious concerns regarding alleged financial irregularities involving these banks.
Why?
The directive follows unresolved issues surrounding the recovery of significant fixed deposits by the Karnataka Industrial Areas Development Board (KIADB) and the Karnataka State Pollution Control Board. According to the Finance Department, these state entities have faced difficulties in retrieving Rs 25 crore worth of deposits from PNB and SBI. Despite multiple attempts to resolve the issues through negotiations, the banks have failed to refund the amounts, prompting the government to take decisive action.
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A pivotal incident prompting this directive involved the KIADB, which had placed Rs 25 crore in a one-year fixed deposit at PNB’s Rajajinagar branch in 2021. The deposit was split into two receipts—one for Rs 12 crore and another for Rs 13 crore. While the Rs 12 crore deposit was refunded after maturity, the bank has yet to return the Rs 13 crore, allegedly due to fraudulent activities involving bank officials.
Another case involved the Karnataka State Pollution Control Board, which invested Rs 10 crore in a fixed deposit at the former State Bank of Mysore, now part of SBI, in August 2013. Before the term matured, bank officials allegedly misused the deposit by diverting it towards a loan for a private company using fake documents. Despite continued efforts and meetings with the bank, the issue remains unresolved, and the bank has refused to refund the money.
Deadline
The government’s directive mandates that all affected entities close their accounts with SBI and PNB and withdraw their funds by September 20, 2024. Departments have been instructed to submit a compliance report detailing the closure of accounts and recovery of deposits to the Finance Department by this deadline.
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This unprecedented decision is expected to have a significant impact on SBI and PNB, as the withdrawal of government funds could strain their operations. However, the directive does not affect personal accounts held by state employees or pensioners, as these are considered private accounts. CS Shadakshari, President of the Karnataka State Government Employees Association, assured that the decision would not impact the salaries or pensions of state employees.
The Finance Department, under the guidance of Secretary (Budget and Resources) PC Jaffer, emphasized that the government was forced to take this action after repeated attempts to resolve the issues with the banks failed. The order also mentioned that no further deposits or investments would be made with SBI or PNB until these matters are fully resolved.
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