• Source:JND
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In response to allegations of misuse of funds from government accounts, the Karnataka government has issued an order to suspend all transactions with two of the top public sector banks- State Bank of India (SBI) and Punjab National Bank (PNB).

The order was approved by the state Chief Minister Siddaramaiah and was issued on August 14.

The state government in an order said that government departments, public enterprises,  local bodies, corporations, universities, and other institutions will have to immediately close accounts they have with the State Bank of India and the Punjab National Bank. The order also states that no further deposits or investments will be made in these banks.

Also Read: Karnataka Govt Suspends Transactions With SBI, PNB Over Allegations Of Misuse Of Funds

What are the allegations?

The order comes amid a tussle between the Congress-ruled Karnataka government and the opposing Bharatiya Janata Party regarding the alleged money transfer scam including the state-run Karnataka Maharishi Valmiki Scheduled Tribes Development Corporation Ltd.

The matter picked up pace when Chandrashekhar P, Superintendent of Accounts, committed suicide on May 26 and left a note. The note claimed that the corporation’s Rs 187 crore was transferred without approval and afterward, the aggregate amount of Rs 88.62 crore was moved to other accounts including the accounts of IT companies and Hyderabad-based cooperative banks.

The state finance department highlighted an alleged fraud involving the Karnataka Industrial Area Development Board funds in the order. Bank officials were allegedly involved in siphoning funds from Punjab National Bank accounts. The government said that the case is pending in court and it is yet to recover crores of rupees.

Similarly, the Karnataka State Pollution Control Board deposited money in SBI Bank, which was allegedly adjusted with a loan for a private company using forged documents in 2013. The case is also pending in court.

The order said that all departments must complete the process of closing and withdrawing funds from both banks' accounts by September 20, and notify the deputy secretary.

Moneycontrol reported quoting government sources that the state government was pressing the banks for the missing funds, but the bank denied citing the matter as sub judice. Hence the Public Account Committee decided to stop doing business with both the banks.

The banks have approached the government to resolve the issue.

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