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Karnataka suspends all financial transactions with SBI and PNB due to allegations of fund misuse, affecting ₹35 crore in deposits. The Karnataka government has set a deadline of September 20 for all departments to report the closure of their accounts in these banks.
The Karnataka government has taken a decisive step by suspending all financial transactions with State Bank of India (SBI) and Punjab National Bank (PNB) following serious allegations of misuse of government funds. This order, issued on August 14, has placed both banks under significant scrutiny.
The directive, approved by Chief Minister Siddaramaiah, mandates that all state departments immediately close their accounts with SBI and PNB. The government has set a deadline of September 20 for all departments to report the closure of their accounts in these banks.
The Karnataka Finance Department has also instructed that no further deposits or investments be made in these banks by state government departments, public enterprises, corporations, local bodies, universities, and other related institutions.
The Karnataka government’s decision stems from allegations of significant financial mismanagement involving public funds. A ₹10 crore fixed deposit made by the Karnataka State Pollution Control Board with SBI in 2013 was allegedly misused to settle loans for a private company using forged documents.
Additionally, the Karnataka Industrial Area Development Board's ₹25 crore fixed deposit with PNB in 2011 is alleged to have been mishandled, with only ₹13 crore recovered, leaving ₹12 crore unaccounted for.
As reported by CNBC, LK Atheeq, Additional Chief Secretary of the Karnataka Finance Department, stated, "There is a case of misappropriation of ₹10 crore in SBI. A similar case exists with PNB. Despite our efforts, the banks have not cooperated in recovering the funds. We took this decision on the advice of the Public Accounts Committee of the legislature."
Sources within the banking sector revealed that SBI and PNB are appealing to the Karnataka government to resolve the issue through dialogue. Both banks have initiated discussions with the state government in hopes of reaching an amicable resolution.
As a direct consequence of this news, the PNB and SBI share prices have come into sharp focus. On Wednesday, the SBI share price closed at ₹803.20, marking a gain of 0.71%, whereas the PNB share price ended at ₹113.75, down by 0.48%.
Investors are closely monitoring the situation, anticipating potential impacts on the banks’ financial performance and stock market standing.
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This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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