Karnataka govt halts directive to suspend dealings with SBI, PNB for 15 days

The Karnataka government has paused its directive to halt all department accounts with State Bank of India (SBI) and Punjab National Bank (PNB) for 15 days. This decision follows discussions with senior officials from both banks, who requested additional time to address the government's concerns.

On Friday, SBI and PNB submitted written requests seeking a 15-day extension to resolve the issue. Senior bank officials then met with the Finance Department, reiterating their appeal for more time. 

In response, the Chief Minister directed the Finance Department to hold the circular in abeyance for the requested period, allowing the banks an opportunity to address the issues raised.

The government emphasized its commitment to transparency and accountability, stating that it would monitor the situation closely and take necessary actions to protect the interests of all stakeholders. 

This move comes after the government’s earlier order on Wednesday, which instructed all departments to close their accounts with SBI and PNB due to allegations of financial irregularities and unauthorized transactions involving state funds.

The allegations include unauthorized transactions involving Rs 187 crore, with Rs 88.62 crore reportedly transferred into accounts held by IT companies and a cooperative bank in Hyderabad. The decision to pause the account closures is linked to concerns over these allegations, which involve the Karnataka Industrial Area Development Board (KIADB) and the Karnataka State Pollution Control Board (KSPCB).

Specifically, the government claims that a Rs 10 crore fixed deposit made by KSPCB with SBI in 2013 was misused to settle loans of a private company using forged documents. Additionally, the KIADB's Rs 25 crore fixed deposit with PNB in 2011 is alleged to have been mishandled, with only Rs 13 crore recovered so far. The remaining amount remains unaccounted for, and the case is still pending in court.

The circular, signed by PC Jaffer, Secretary (Budget & Resources) of the Finance Department, had initially set a deadline of September 20, 2024, for all departments to comply with the directive. However, the recent meeting with bank officials failed to yield an immediate resolution, leading to the temporary pause.

Meanwhile, the issue has sparked a political battle between the Congress-led Karnataka government and the opposition BJP, particularly concerning the alleged misappropriation of funds by the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd.

Both SBI and PNB responded to the situation by referencing the ongoing legal proceedings. In a statement on August 15, SBI noted that it is in dialogue with the Karnataka government to resolve the issue amicably. PNB has also echoed this sentiment, emphasizing its commitment to finding an amicable resolution.