Lenders in talks with govt for “amicable resolution” after Karnataka halts transactions with SBI, PNB

On August 12, the Karnataka’s finance department issued an order asking all state government departments, public sector units, boards, corporations, local bodies, universities and other institutions to close accounts at SBI and PNB.

SBI and PNB in separate statements issued on Thursday said they are committed for amicable resolution of the matter and are in discussion with the Karnataka government. (File)

Days after Karnataka government ordered all its departments and public sector units to close all their accounts at State Bank of India (SBI) and Punjab National Bank (PNB), both the lenders on Thursday said they are in talks with the state government for a ‘amicable resolution’ of the issue.

On August 12, the Karnataka’s finance department issued an order asking all state government departments, public sector units, boards, corporations, local bodies, universities and other institutions to close accounts at SBI and PNB.

The state government has set a September 20 deadline for all departments to comply with the direction, according to a circular issued by P C Jaffer, secretary in the department, on Monday.

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SBI and PNB in separate statements issued on Thursday said they are committed for amicable resolution of the matter and are in discussion with the Karnataka government.

However, both the lenders did not provide any specific comment as the matter is currently sub judice.

The Karnataka government’s decision followed two fraudulent transactions reported at these banks. The first is related to PNB’s Rajajinagar branch, Bangalore, where the Karnataka Industrial Area Development Board had started a fixed deposit of Rs 25 crore on September 14, 2011. However, after the term of the deposit ended, PNB allegedly released only Rs 13 crore, citing fraud by bank officials.

The other case was related to a fixed deposit at the erstwhile State Bank of Mysore, which merged with the SBI in 2017. The Karnataka State Pollution Control Board had a fixed deposit of Rs 10 crore at the bank’s Avenue Road branch, Bangalore. According to the state government, the amount was adjusted to the loans taken by a private company using forged documents. Attempts to recover the amount are said to have suffered the same fate as that of the fixed deposit in PNB.

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