'Close all deposits...': Karnataka government suspends transactions with SBI, PNB due to...

The Karnataka government, led by Chief Minister Siddaramaiah, has directed all state government departments, public sector undertakings, boards, corporations, local bodies, universities, and other state-run institutions to suspend transactions with the State Bank of India (SBI) and Punjab National Bank (PNB). 

The directive, issued by Finance Secretary PC Jaffer, directed all the state government undertakings to close their accounts with these banks and recover their deposits, setting a deadline of September 20 for the compliance of the order. 

Reasons behind the state government's directive:

As mentioned in the official directive, two major incidents of financial irregularities involving the SBI and the PNB have prompted the government to take the step. The Karnataka government has claimed that the Karnataka Industrial Areas Development Board deposited Rs 25 crores in a fixed deposit for a one-year term at the Punjab National Bank, Rajajinagar branch in 2021. The bank issued two fixed deposit receipts, one for Rs 12 crores and another for Rs 13 crores. Post the maturity of the term, the first fixed deposit amounting to Rs 12 crore was encashed. However, the bank has not refunded the amount related to the second deposit, following allegations of a fruad involving the bank officials. 

"The Karnataka Industrial Areas Development Board deposited ₹25 crores in a fixed deposit for a one-year term at the Punjab National Bank, Rajajinagar branch, through a cheque on 14.09.2021. In return, the bank issued two fixed deposit receipts, one for ₹12 crore from another branch of the same bank in Sankari Bank, Salem, and another for ₹13 crore. After the maturity of the term, the ₹13 crore deposit was encashed. However, due to an alleged fraud involving the bank officials in connection with the second deposit, the bank has not refunded the amount to date", the order read. 

The order further stated, “The Karnataka State Pollution Control Board had invested ₹10 crore in a fixed deposit at the then State Bank of Mysore, Avenue Road, Bangalore, in August 2013. Before the term matured, the amount related to the said deposit was adjusted by the bank officials towards a loan for a private company using fake documents. Despite correspondence and meetings with the bank regarding this fraudulent case, the bank has refused to refund the money.”

The order, therefore, directed the government undertakings to suspend transctions with these banks, following the allegations of fraud involving government's funds. 

“Further, offices, public enterprises, corporations, boards, local bodies, universities, and other institutions under the administrative control of your department are instructed to close all deposits and other accounts held in all branches of State Bank of India and Punjab National Bank, and to submit confirmation along with details of deposits and accounts in the attached format to the Deputy Secretary, Finance Department, Budget and Resources Section, by 20.09.2024,” it stated.