Karnataka Government Orders Departments to Close Accounts with SBI and PNB

In a significant move, the Karnataka government has directed all its departments, boards, corporations, public sector units, and universities to withdraw their deposits and investments from the State Bank of India (SBI) and Punjab National Bank (PNB). This decision announced through a circular dated August 12, 2024, is a response to allegations of fund misappropriation involving employees of these banks.

Government Action Following Alleged Misappropriation

The government’s directive stems from incidents involving the Karnataka Industrial Area Development Board (KIADB) and the Karnataka State Pollution Control Board (KSPCB), where a total of Rs. 22 crore was allegedly misappropriated by employees of SBI and PNB. Despite multiple discussions, the banks did not return the misappropriated funds, leading the state government to take decisive action. The circular, signed by PC Jaffer, Secretary (Budget & Resources) of the Finance Department, and approved by Chief Minister Siddaramaiah, sets a deadline of September 20, 2024, for all state institutions to comply. Departments are required to close their accounts in these banks and submit closure reports to the finance department by this date.

Banks’ Cautious Responses Amid Legal Proceedings

In response to the government’s directive, both SBI and PNB have issued cautious statements, highlighting the ongoing legal proceedings. SBI emphasized that it is in dialogue with the Karnataka government to resolve the issue amicably but refrained from commenting further due to legal constraints. PNB echoed this sentiment, noting that while it cannot provide detailed comments because the matter is sub judice, it remains committed to finding a resolution and is actively engaging with the state government to address the concerns.

Conclusion: The Karnataka government’s decision to sever ties with SBI and PNB over allegations of fund misappropriation marks a significant change in the state’s financial landscape. Both banks have expressed a commitment to resolving the issue, though the ultimate outcome remains uncertain.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.