The Karnataka state government has ordered all its departments and affiliated institutions to immediately close their accounts with the State Bank of India (SBI) and Punjab National Bank (PNB). This decision stems from alleged financial irregularities involving these banks.
Key Points of the Order
- All state government departments, public undertakings, corporations, boards, local bodies, universities, and other institutions are required to withdraw their deposits and investments from SBI and PNB without delay.
- The government has also instructed that no new deposits or investments should be made in these banks.
- This directive follows allegations that unauthorised transactions involving Rs 187 crore of state funds were uncovered. Specifically, Rs 88.62 crore was allegedly transferred into accounts held by IT companies and a cooperative bank in Hyderabad.
Background and Government Response
The decision comes after repeated warnings and communications from the state government regarding these alleged irregularities were reportedly ignored by the banks. The Siddaramaiah-led government took this step as a response to these ongoing concerns.
Impact on Public Sector Banks
The Finance Department of Karnataka, which is under the jurisdiction of Chief Minister Siddaramaiah, issued a circular detailing the failures of the banks, such as the Karnataka Industrial Areas Development Board (KIADB)‘s inability to recover a deposit from PNB and the Pollution Control Board being denied a similar deposit by SBI.
The state government’s decision to cease all transactions with these banks, while pending court cases are still unresolved, appears to be a swift action aimed at safeguarding public funds.
Banks’ Response
Senior officials from SBI and PNB have reportedly rushed to the Finance Department in an effort to persuade the government to reconsider its decision. However, the state government remains firm, having asked all heads of departments to report their compliance with the order.
Worth Noting.
This move by the Karnataka government highlights significant concerns over financial irregularities and reflects the state’s commitment to ensuring transparency and accountability in the management of public funds. As the situation develops, the response of the banks and the outcomes of the pending court cases will likely play a crucial role in determining the future relationship between the state government and these major public sector banks.
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