Following allegations of misuse of funds, the Karnataka government has directed all its departments, boards and corporations to suspend all transactions with the State Bank of India (SBI) and Punjab National Bank (PNB).
The government also ordered all its departments to withdraw their deposits and investments in these two banks owned by the Central government.
"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 forthwith. Additionally, no further deposits or investments are to be made in these banks," said the order issued by the Finance Department, which comes under Chief Minister Siddaramaiah.
The order came amid the allegations of misuse of government funds deposited in these banks. The government has alleged that the Rs 12 crore deposited by the Karnataka Industrial Area Development Board (KIADB) and Rs 10 crore deposited by the Karnataka State Pollution Control Board (KSPCB) were not returned following a scam involving bank employees.
On August 12, a state government circular noted that the meeting with the bank officials did not yield any result and the matter is now sub judice.
“In this background, it is informed through this circular that the state government's departments, public sector units, corporations, boards, local bodies and universities and other institutions should withdraw all the deposits/investments made in all the branches of the State Bank of India and the Punjab National Bank and no deposits/investments should be made in future,” the circular read.
All government institutions have been directed to close their accounts in these two banks and submit a closer report to the finance department by September 20.