The Karnataka government issued a directive on Wednesday instructing all state departments to close their accounts with State Bank of India (SBI) and Punjab National Bank (PNB). The government ordered that no further deposits or investments be made in these banks, citing allegations of financial misappropriation.
The directive, detailed in a circular dated August 12, came from PC Jaffer, Secretary (Budget & Resources) in the Finance Department, with approval from Chief Minister Siddaramaiah. The circular sets a compliance deadline of September 20 for all departments.
Mandatory Closure of Accounts in SBI and PNB
According to the circular, all accounts held by state government departments, public enterprises, corporations, local bodies, universities, and other institutions in SBI and PNB must be closed immediately. The directive also prohibits any future deposits or investments in these banks.
The decision follows reports of fraudulent activities related to fixed deposits in both banks.
One of the reported cases involves a Rs 25 crore fixed deposit at PNB’s Rajajinagar branch, initiated by the Karnataka Industrial Area Development Board in 2011. Despite the maturity of the deposit, the bank allegedly released only Rs 13 crore. Efforts to resolve this issue over the past decade have been unsuccessful.
Another incident involves a Rs 10 crore fixed deposit at the former State Bank of Mysore, now merged with SBI. The Karnataka State Pollution Control Board’s deposit was allegedly misused to settle loans for a private company using forged documents. Attempts to recover this amount have also failed.
A senior government official told Moneycontrol that they had repeatedly pressed the banks to address the missing funds, but the banks claimed the matters were sub judice. The State Public Accounts Committee decided to halt business with these banks, leading to the circular for withdrawing the deposits. The banks have since approached the Finance Department, requesting more time to resolve the issues and avoid further escalation.
This directive comes amid ongoing political tensions between the BJP-led Opposition and the Congress-ruled Karnataka government. The controversy also links to an alleged fund transfer scam at the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd. The issue was exposed in a suicide note left by the corporation’s accounts superintendent, Chandrashekhar P, on May 26.