The Karnataka government has decided to resume its relationship with two major public sector banks, the State Bank of India (SBI) and Punjab National Bank (PNB), after successfully recovering Rs 22.67 crore of embezzled money. This recovery also included one year’s interest, signaling a significant breakthrough in a long-standing dispute. Karnataka Government raised various issues with SBI and PNB Bank.
- Mismanagement of Fixed Deposit at PNB: A fixed deposit of Rs 25 crore was made at PNB’s Rajajinagar branch by the Karnataka Industrial Area Development Board on September 14, 2011. Despite the deposit term ending, PNB allegedly released only Rs 13 crore. Efforts to resolve this issue over the past decade have been unsuccessful.
- Fraudulent Use of Deposit at SBI: A Rs 10 crore fixed deposit made by the Karnataka State Pollution Control Board at the former State Bank of Mysore, now part of SBI, was allegedly misused to settle loans for a private company using forged documents. Attempts to recover this amount have also failed.
Background of the Dispute
Earlier, the state government had accused both SBI and PNB of failing to cooperate in recovering Rs 22 crore that had been misappropriated. As a result, on August 12, 2024, the Karnataka Finance Department issued a circular instructing all government departments to halt transactions with the two banks. This move was aimed at pressuring the banks to act on recovering the embezzled funds. The government said that banks were not responding properly to the request of government.
However, just four days later, the government decided to suspend this boycott after both banks requested time to resolve the issue. Their response led to further negotiations, eventually resulting in the repayment of the stolen money. Banks requested government to give some time to resolve the issues and government accepted the request of Banks.
Resolution of Issues
Now Karnataka Government has announced that the issues with both the banks have been resolved. The amount has been recovered from both the banks.
Speaking about the recovery, Additional Chief Secretary (Finance) LK Atheeq explained that the two banks had paid back the embezzled amount along with one year’s interest. SBI returned Rs 9.67 crore, while PNB paid Rs 13 crore. This payment was made subject to ongoing court cases.
“We have achieved substantial success in our effort to recover the misappropriated funds from nearly 13 years ago,” said Atheeq. He also confirmed that the state government would continue banking with both SBI and PNB. Despite this progress, the government will still pursue the banks for the recovery of additional interest.
Political Reactions
The decision to cut ties with SBI and PNB initially sparked criticism from the Opposition BJP. They questioned the Congress-led government’s choice to end relationships with such prominent banks, arguing that it could disrupt public services. However, with the recovery of funds, the government’s move to resolve the issue appears to have mitigated these concerns.
Conclusion
With the embezzled money largely recovered, the Karnataka government is resuming its partnership with SBI and PNB. While the financial loss from over a decade ago is being rectified, ongoing court cases will determine the final outcome of the interest recovery. The case serves as a reminder of the importance of transparency and accountability in financial dealings involving public funds.
