In Short:
The Karnataka Government has ordered all its departments and organizations to stop using the State Bank of India and Punjab National Bank due to unresolved issues with funds. The Karnataka Industrial Areas Development Board lost ₹12 crore from a fixed deposit at PNB, and the Pollution Control Board’s ₹10 crore deposit with SBI was misused. Attempts to recover these funds failed.
The **Karnataka Government** has made a bold move, instructing all its departments, public sector units, universities, and subordinate organizations to halt any transactions with the **State Bank of India (SBI)** and **Punjab National Bank (PNB)**. This directive was reported by **The Economic Times** and marks a significant turning point in the state’s banking relationships.
Background of the Decision
The **Finance Department** issued a circular aimed at department heads, pointing out that the **Karnataka Industrial Areas Development Board (KIADB)** has struggled to recover a deposit from **PNB**. Similarly, the **Karnataka State Pollution Control Board** encountered frustrating challenges with **SBI**. The circular emphasized the government’s lack of success despite numerous attempts to engage with the two public sector banks.
Immediate Actions Required
According to the order, “Accounts held in the **State Bank of India** and **Punjab National Bank** by state government departments, public enterprises, corporations, local bodies, universities, and other institutions must be terminated forthwith. Additionally, no further deposits or investments are to be made in these banks.” This statement clearly outlines the urgency of the directive.
Rationale Behind the Move
The decision, overseen by Chief Minister **Siddaramaiah**, mandates that all department heads quickly close accounts and fixed deposits with the two banks. They are also instructed to report back on their compliance, ensuring a smooth transition away from these institutions.
Concerns Raised
The circular also highlighted issues raised by audit authorities and the public accounts committees in the legislature, stressing the significance of these financial mishaps.
The Fraudulent Transactions
This decision is largely a reaction to reports of two fraudulent transactions that have sparked concern. The first case involves a **₹25 crore** fixed deposit placed by the **Karnataka Industrial Area Development Board** at **PNB’s** Rajajinagar branch back in 2011. Although the deposit term has ended, **PNB** has reportedly returned only **₹13 crore**, with resolution efforts spanning nearly a decade proving fruitless.
The second case comes from a **₹10 crore** fixed deposit made by the **Karnataka State Pollution Control Board** at what was formerly known as the **State Bank of Mysore** (now part of **SBI**). Alarmingly, this deposit was misused to pay off loans for a private company using forged documents, and like the previous instance, recovery attempts have also hit a dead end.
