Govt. keeps Finance Department’s circular on cutting ties with SBI, PNB in abeyance for 15 days

Chief Minister Siddaramaiah | Photo Credit:

Two days after issuing a circular severing all its ties with India’s largest public sector lender State Bank of India (SBI) and the Punjab National Bank (PNB) over financial frauds that led to the embezzlement of taxpayers’ money, the Karnataka government on Friday decided to keep the circular in abeyance for 15 days following request by both the banks.

After considering the banks’ requests, Chief Minister Siddaramaiah, who also holds the Finance portfolio, has directed officials of the Finance Department to keep the circular in abeyance for 15 days. “This will allow the banks sufficient time to address the issues and redress the concerns of the government,” said a statement issued by the Chief Minister’s Office.

Written representation

On Friday, both the banks submitted written representations to the government, requesting 15 days to resolve the matter. Following this, senior bank officials met with higher officials of the Finance Department and reiterated their request.

“The government is committed to ensuring transparency and accountability in all its dealings. We will continue to monitor the situation and take appropriate action to protect the interests of all stakeholders,” the government said in the statement.

Based on the observations made by the Public Accounts Committee on July 2, 2024, and August 6, 2024, and the audit findings included in the Comptroller and Auditor General’s report, the State government decided to issue the circular on August 12, 2024, directing all departments to withdraw their deposits and restrict further deposits in all branches of PNB and SBI.

Fraud in branches

The action was taken in response to the alleged fraud in the bank branches, which resulted in the non-repayment of fixed deposits made by the Karnataka State Pollution Control Board (KSPCB) and the Karnataka Industrial Area Development Board (KIADB).  Despite prolonged correspondence and meetings, these issues remained unresolved since 2012-13, the statement added.

In the circular dated August 12, the Finance Department had asked all departments, public enterprises, corporations, boards, local bodies, and universities to withdraw all deposits or investments from the two banks. Also, they were asked to close all their accounts in both the banks. According to the circular, SBI and PNB had not cooperated with the government in recovering ₹22 crore that was embezzled.