SBI refunded Rs 9.67 crore and PNB returned Rs 13 crore, both with one year of interest | File Photo
The Karnataka government has decided to retract the circular that directed its departments to cease business relations with the State Bank of India (SBI) and Punjab National Bank (PNB), according to a report by MoneyControl. This decision comes in the wake of the repayment of Rs 22.67 crore in “misappropriated” funds by both the state-run banks, along with one year’s interest.
On August 12, the Karnataka Finance Department had issued a directive to all departments, boards, corporations, universities, local authorities and public sector undertakings to cut ties with the two banks. The government had accused the banks of not cooperating in recovering the embezzled Rs 22 crore. However, four days later, the circular was put on hold.
An official told MoneyControl: “SBI refunded Rs 9.67 crore and PNB returned Rs 13 crore, both with one year’s interest, pending the outcome of legal proceedings.”
Why did Karnataka government issue circular against PNB and SBI?
The circular came in the wake of two cases of fraudulent transactions. The first case concerned a fixed deposit of Rs 25 crore made by the Karnataka Industrial Area Development Board at PNB’s Rajajinagar branch on September 14, 2011. Even though the deposit tenor had expired, PNB had reportedly released only Rs 13 crore, with no resolution taking place in the intervening decade.
The second case concerns a fixed deposit of Rs 10 crore held by the Karnataka State Pollution Control Board in the erstwhile State Bank of Mysore, now merged with SBI. This amount was allegedly misappropriated to settle loans to a private company using forged documents.
In light of these issues, the circular (issued in August) stated: “It is hereby informed that state government departments, public sector units, corporations, boards, local authorities, universities and other institutions should withdraw all deposits/investments from all branches of SBI and PNB and no further deposits/investments should be made.”
Despite extensive correspondence and meetings, these issues had remained unresolved since 2012-2013, the Karnataka government notification further noted.
First published: September 5, 2024 | 10:39 am IS
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