On Wednesday, the Karnataka government took a significant step by ordering all state departments to close their accounts in the State Bank of India (SBI) and Punjab National Bank (PNB). This decision comes as a response to allegations of misappropriation of funds.
What the New Order Means
The Karnataka government has directed all departments, public enterprises, corporations, local bodies, universities, and other institutions to close their accounts with SBI and PNB immediately. The order, issued in a circular dated August 12 by PC Jaffer, the Secretary of Budget & Resources in the Finance Department, and approved by Chief Minister Siddaramaiah, specifies that no further deposits or investments should be made in these banks.
The deadline for compliance with this directive is set for September 20.
Reasons Behind the Decision
The decision follows reports of two major fraudulent transactions:
- 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.
A senior government official told that the banks have claimed the matter is sub judice, but this has not stopped the State Public Accounts Committee from deciding to halt business with these banks. The government has issued the circular to withdraw deposits and is awaiting a response from the banks, which have requested additional time to address the issues.
Political Context
This move comes amid a heated political climate in Karnataka, with the BJP-led opposition clashing with the Congress-ruled state government. The controversy has intensified following the exposure of an alleged fund transfer scam involving the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd. A suicide note from Chandrashekhar P, the corporation’s accounts superintendent, revealed details of the alleged scam, adding fuel to the political fire.
The Karnataka government’s decision marks a significant shift in the handling of state funds and could lead to further developments as investigations continue and responses from the banks are awaited.
