Karnataka directs all govt depts to suspend transactions with SBI, PNB

The Karnataka government on Wednesday issued an order asking all state government departments, including public sector units, boards, corporations, local bodies, and universities, for the immediate withdrawal of deposits from State Bank of India (SBI) and Punjab National Bank (PNB) and stop transacting any business with these institutions.

The circular said these entities need to send confirmation of the same on or before September 20 to the government.

The 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.

The order received the approval of Karnataka chief minister Siddaramaiah.

One incident involved PNB’s Rajajinagar branch, where the Karnataka State Industrial Board had fixed deposits of Rs 25 crore, but PNB released only Rs 13 crore on maturity, citing pending court cases.

The other case related to the erstwhile State Bank of Mysore (which was merged with SBI in 2017), where the Karnataka State Pollution Control Board had a fixed deposit of Rs 10 crore. 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.

An SBI official, who wished to remain anonymous, said the order came as a surprise, as such a decision was taken by the Karnataka government despite the matter being sub judice. They noted the amount involved in the matter is ‘small’, and the bank had faced similar instances earlier.

“In this background, 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 added.

 

SBI hikes MCLR by 10 bps across tenors effective today
 

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