Karnataka News: The Karnataka government has mandated that all state departments, public sector units, universities and subordinate organisations to immediately stop all financial transcations with the State Bank of India (SBI) and Punjab National Bank (PNB). This directive includes the closure of existing accounts and the recovery of deposits, with no further deposits or investments allowed in these banks.

Why Karnataka Govt Issued This Directive

The decision follows serious concerns about fraud involving both banks. The Finance Department issued a circular to all heads of departments, highlighting ongoing issues faced by the Karnataka Industrial Areas Development Board (KIADB) and the Pollution Control Board in recovering Rs 25 crore fixed deposits from PNB and SBI, respectively. Despite numerous attempts to resolve these matters, negotiations with both banks have been unsuccessful.

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In the directive, the government stated, "Accounts held in the State Bank of India and Punjab National Bank by state government departments, public enterprises, corporations, local bodies, universities, and other institutions must be terminated promptly. Additionally, no further deposits or investments are to be made in these banks."

Deadline For SBI And PNB Bank Account Closure

A September 20 deadline has been set for compliance with the order, as outlined in the circular dated August 12 from PC Jaffer, secretary (budget and resources) in the Finance Department, which received approval from Chief Minister Siddaramaiah.

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Details Of SBI And PNB Fraudulent Transactions

This decision stems from serious concerns related to two fraudulent transactions. The first instance involves a Rs 25 crore fixed deposit placed by the KIADB at PNB's Rajajinagar branch on September 14, 2011. Although the term for this deposit has concluded, PNB reportedly returned only Rs13 crore. Efforts to resolve the matter over the past ten years have failed.

The second case relates to a Rs10 crore fixed deposit made by the Karnataka State Pollution Control Board at the erstwhile State Bank of Mysore, now a part of SBI. This deposit was allegedly misappropriated to pay off loans for a private company using forged documentation and attempts to recover the funds have also been ineffective.