Bengaluru: In a decisive move, the Karnataka state government has ordered the immediate withdrawal of deposits held by government departments, public undertakings, corporations, boards, local bodies, universities, and other state-run institutions from accounts with the State Bank of India (SBI) and Punjab National Bank (PNB). The directive, issued with the approval of Chief Minister Siddaramaiah, comes in the wake of longstanding unresolved fraud cases and dissatisfaction with the response of these banks in addressing these issues.
The circular, signed by Finance Department Secretary Dr. PC Jaffer (Budget and Resources), clearly instructs all relevant entities to not only withdraw their deposits but also refrain from making any further deposit investments in these two banks. Deputy Chief Secretaries, Principal Secretaries, and Secretaries across all departments have been tasked with ensuring compliance with this directive.
A stringent deadline has been set for the completion of this process. The circular mandates that all withdrawn deposits be documented in a prescribed annexure, which must include confirmation of account closure details. These documents are to be submitted to the Finance Department by September 20, 2024.
This sweeping order is rooted in serious financial mismanagement and fraud cases involving these banks that have dragged on for over a decade. For instance, the Karnataka Industrial Area Development Board (KIADB) had invested in a one-year fixed deposit with the Rajajinagar branch of PNB on September 14, 2011. The amount involved was significant, with one fixed deposit receipt amounting to Rs 12 crore and another to Rs 13 crore. While the Rs 13 crore deposit was encashed after the period expired, the other Rs 12 crore deposit has been embroiled in a fraud case allegedly perpetrated by bank officials. Despite numerous meetings and correspondences with the bank, the issue remains unresolved, and the case has languished in the courts for over 10 years.
In a similar case, the Karnataka State Pollution Control Board (KSPCB) had deposited Rs 10 crore in a fixed deposit with the Avenue Road branch of the then State Bank of Mysore (which later merged with SBI) in August 2013. Before the deposit matured, bank officials allegedly adjusted the money against a loan taken by a private company using forged documents. Despite multiple attempts by the KSPCB to recover the funds through meetings and correspondence, the bank refused to refund the money. This case, too, remains mired in legal proceedings.
The gravity of these incidents has been underscored by the Public Accounts Committee (PAC) of the Karnataka Legislative Assembly, where the Auditor General’s reports and objections have been hotly debated. The decision to withdraw deposits, restrict future investments, and close accounts with SBI and PNB is seen as a direct outcome of these discussions, which are recorded in the PAC’s meeting proceedings.
The circular highlights the government’s position by stating that the immediate withdrawal of all deposits and investments made by state government departments and associated institutions in all branches of SBI and PNB is non-negotiable. Furthermore, no further deposits or investments shall be made in these banks.
The directive extends to all offices, public enterprises, corporations, boards, local bodies, universities, and other institutions under the administrative control of various government departments. These entities are instructed to close all deposits and accounts held in SBI and PNB branches. The details of these accounts, along with confirmation of their closure, must be submitted to the Deputy Secretary to Government, Budget and Resources Branch, Finance Department, by September 20, 2024.
