Karnataka government  put on hold a circular directing all government departments to stop transactions with the State Bank of India (SBI) and restrict deposits with the Punjab National Bank (PNB) in the state.

“Based on the observations made by the Public Accounts Committee on July 2, 2024, and August 6, 2024, and the audit findings included in the Comptroller and Auditor General’s (CAG) report, the government has decided to issue the circular, FD-CAM/49/2024 on August 12, 2024, directing all departments to withdraw their deposits and restrict further deposits in all branches of Punjab National Bank and State Bank of India,” reads the circular.

The circular added that the action was taken in response to the alleged fraud in the bank branches, which resulted in the non-repayment of fixed deposits made by the Karnataka State Pollution Control Board (KSPCB) and the Karnataka Industrial Area Development Board (KIADB).

“Despite prolonged correspondence and meetings, these issues remained unresolved since 2012-13. On August 16, 2024, both banks submitted written representations to the government, requesting a 15-day period to resolve the matter. The same day, senior bank officials met with higher officials of the Finance Department and reiterated their request,” said the government circular.

It said that after considering the banks’ requests, the Chief Minister directed officials of the Finance Department to keep the circular in abeyance for 15 days. “This will allow the banks sufficient time to address the issues and redress the concerns of the government.”

“The government is committed to ensuring transparency and accountability in all its dealings. We will continue to monitor the situation and take appropriate action to protect the interests of all stakeholders,” the circular stated.