The Government of Karnataka has directed all its departments, public sector units, universities and subordinate organisations to cease all transactions with the State Bank of India (SBI) and Punjab National Bank (PNB), cited by The Economic Times.
The Finance Department has issued a circular to all department heads, highlighting that the Karnataka Industrial Areas Development Board (KIADB) was unable to recover a deposit from the Punjab National Bank (PNB), while the Pollution Control Board faced a similar issue with the State Bank of India Despite multiple rounds of negotiations with the two public sector banks, the government’s efforts were unsuccessful, the circular said.
“Accounts held in the State Bank of India “The trading operations of shares in Punjab National Bank by state government departments, public undertakings, corporations, local bodies, universities and other institutions should be terminated forthwith. Further, no further deposits or investments should be made in these banks,” the order said.
Why did the Karnataka government take this decision?
The Finance Department, under Chief Minister Siddaramaiah, has directed all department heads to promptly close accounts and fixed deposits in the two banks and report their compliance to the government.
The circular also referred to concerns raised by audit authorities and public accounts committees of the legislature regarding this issue.
This action comes in response to reports of two fraudulent transactions. The first case concerns a ₹Fixed deposit of Rs 25 crore made by Karnataka Industrial Area Development Board at PNB branch in Rajajinagar on 14 September 2011. Though the deposit period has ended, PNB allegedly returned only ₹13 crore, and attempts to resolve the problem over the past decade have failed.
The second case involves a ₹Fixed deposit of Rs 10 crore in the erstwhile State Bank of Mysore, now part of SBI. The deposit, made by the Karnataka State Pollution Control Board, was misused to settle loans to a private company using forged documents. Efforts to recover the funds also failed.
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