SBI, Punjab National Bank in talks with Karnataka to resolve issues

One incident involved PNB's Rajajinagar branch, where the Karnataka State Industrial Board had fixed deposits of approximately Rs 25 crore, but PNB released only Rs 13 crore on maturity

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Punjab National Bank (PNB) and State Bank of India (SBI) on Thursday said they were in talks with Karnataka and expected an amicable resolution to ongoing stand-off involving two term deposits, which has now taken an unexpected turn with the state government deciding to snap all ties with the two state-run banks.

“As the matter is currently sub-judice, it would not be prudent to make any specific comments. However, the bank is committed to an amicable resolution and is in discussion with the Government of Karnataka,” the state-run bank said.

PNB was reacting to a circular issued by the Karnataka government asking all state government departments, public sector units, boards, corporations, local bodies, universities and other institutions to close all accounts with PNB and State Bank of India (SBI) by September 20.

The first case involved PNB’s Rajajinagar branch, where the Karnataka State Industrial Board had opened fixed deposits of Rs 25 crore in September 2014.

But, after the completion of the term, the bank released Rs 13 crore, while withholding the remaining amount citing pending court cases. The case is being heard in a local court.

The state government is locked in a similar dispute with SBI.

The Karnataka State Pollution Control Board had opened a fixed deposit of Rs 10 crore with the erstwhile State Bank of Mysore -- which was merged with SBI in 2017.

The state government alleged that before the maturity of the deposit, the funds were adjusted against loans taken by a private company based on forged documents.

SBI too has said that it was in talks with the state government to end the impasse.

“As the matter is currently sub-judice, we are unable to provide any specific comments at this time. However, we remain in ongoing discussions with the Government of Karnataka to resolve the issue amicably,” the bank said in a statement.

The Karnataka circular, dated August 12, was signed by PC Jaffer, secretary in the finance department, citing two separate incidents involving these public sector banks as the reason for the action.

“It is informed through this circular that the state government's departments, public sector units, corporations, boards, local bodies, universities, and other institutions should withdraw all the deposits/investments made in all the branches of the SBI and the PNB and no deposits/investments should be made in future,” the circular said.