Karnataka halts transactions with SBI, PNB

BENGALURU: The Karnataka government has decided to stop all its transactions with the State Bank of India (SBI) and Punjab National Bank (PNB) citing alleged financial irregularities concerning deposits made by its entities.

The government has issued a circular directing all departments, state-owned public-sector undertakings, boards and corporations, and universities to halt their transactions, withdraw deposits, and close their accounts with the two public sector banks with immediate effect. The departments have been directed to submit a compliance report by September 20.

A senior officer in the state government said the move will not impact employees’ salary accounts or pensioners’ accounts as they are personal accounts.

Karnataka State Government Employees’ Association president CS Shadakshari said the decision will not have any impact on the state government employees’ accounts.

According to the circular, the decision to end all transactions with the two banks was taken in view of the alleged irregularities in deposits made by the Karnataka Industrial Area Development Board (KIADB) and the Karnataka State Pollution Control Board (KSPCB) with PNB and the then State Bank of Mysuru (SBM), respectively. SBM merged with SBI in 2017.

The KIADB deposited Rs 25 crore through a cheque with the PNB’s Rajaji Nagar branch in Bengaluru on September 14, 2011, as a one-year fixed deposit (FD). Two receipts, one for Rs 13 crore and another for Rs 12 crore were given by the Sankari branch of the bank in Salem.

CAG raised objections to both cases

After one year, Rs 13 crore FD was encashed. “However, in the second FD (for Rs 12 crore), the money was not returned due to the alleged irregularities by some officials of the bank,” the circular stated. Despite writing to the bank and holding meetings with its officials, the issue was not settled. A case against the bank was filed 10 years ago, the circular stated. In the second instance, the KSPCB, in August 2013, invested Rs 10 crore with the then State Bank of Mysuru’s Avenue Road branch in Bengaluru as FD for one year. “Even before the term ended, the bank officials, using fake documents, adjusted the money to a loan taken by a private firm.

Despite holding several meetings, the bank did not return the money. This case is also now in the court,” the circular stated. The Comptroller & Auditor General too raised objections over both the cases. It was also discussed in the Public Accounts Committee (PAC) meetings several times. In the PAC meetings, it was decided that the government must stop all its transactions with the two banks.