The Karnataka government has directed all its departments, boards, corporations, public sector units, and universities to withdraw all deposits and investments from the State Bank of India (SBI) and the Punjab National Bank (PNB). The decision, approved by Chief Minister Siddaramaiah, stems from allegations of misappropriation of funds involving these banks.
In a circular issued by PC Jaffer, Secretary (Budget & Resources) of the Finance Department, on August 12, all government entities have been instructed to cease any further transactions with SBI and PNB and submit a compliance report by September 20. This includes prohibiting new deposits or investments in these institutions.
The government’s action is a response to two specific cases where funds were allegedly embezzled and the banks failed to cooperate in recovering the lost amounts. The first case involves a fixed deposit of Rs 25 crore by the Karnataka Industrial Areas Development Board (KIADB) at the Rajajinagar branch of PNB in September 2011. While Rs 13 crore was encashed, Rs 12 crore remains unrecovered due to an alleged fraud involving bank officials. The circular said that letters and meetings with bank officials did not yield results, and the matter is now pending in court.
The second case involves a Rs 10 crore fixed deposit by the Karnataka State Pollution Control Board (KSPCB) at the former State Bank of Mysore, now part of SBI. The deposit was allegedly misused to settle loans for a private company using forged documents, and efforts to reclaim the amount have been unsuccessful.