Karnataka government suspends controversial circular on SBI and PNB transactions for 15 days

The Karnataka government on Friday suspended its circular, which banned all business transactions with State Bank of India (SBI) and Punjab National Bank (PNB), for 15 days. This move followed the review of demands made by the two banks as considered by Karnataka Chief Minister Siddaramaiah.

A government circular issued on August 12 directed all departments, boards, corporations, public sector units and universities to immediately withdraw all their deposits and investments from SBI and PNB. In addition, the circular forced no more commercial transactions with these banks.

“After considering the requests of the banks, the Hon’ble Chief Minister directed the Finance Department officials to keep the circular on hold for 15 days,” a state government release said.

The statement explained that the suspension of the earlier circular “will give banks enough time to address the issues and address the government’s concerns.” It emphasized the government’s commitment to transparency and accountability in all its dealings.

“We will continue to monitor the situation and take appropriate measures to protect the interests of all stakeholders,” the statement added.

The state government explained that its decision to issue the circular on August 12, asking all departments to withdraw and restrict further deposits in SBI and PNB, was based on the observations of the Public Accounts Commission on July 2 and August 6, as and findings. from the report of the Comptroller and Auditor General. This action was in response to the alleged bank fraud that resulted in non-repayment of fixed deposits from the Karnataka State Pollution Control Board (KSPCB) and the Karnataka Industrial Area Development Board (KIADB).

The Government noted that these issues remained unresolved despite extensive correspondence and meetings in 2012-13. On August 16, both banks filed written appeals seeking an extension of 15 days to address the concerns. On the same day, senior bank officials met senior Finance Department officials to reiterate their request.

The previous circular indicated that PNB and SBI had frozen KIADB funds of Rs 12 crore and KSPCB funds of Rs 10 crore respectively due to issues related to scams within the banks.

Also Read: Why Karnataka Govt Cuts Banking Ties With SBI And PNB? explicitly