Mumbai/Bengaluru: A day after Karnataka finance department announced its decision to halt all transactions with State Bank of India (SBI) and Punjab National Bank (PNB) over alleged embezzlement of govt funds deposited with these financial entities, both the banks reached out to state govt, seeking “amicable” settlement of the issue.
Sources in the finance department confirmed to TOI that the two banks were indeed engaged with govt on the matter, and a meeting had been scheduled for Friday in Bengaluru.
The public sector lenders have issued separate statements on Thursday, saying the matter at the root of the problem was still “sub judice”. The dispute stems from the failure of SBI and PNB to return the deposits of two state govt entities.
“As the matter is currently sub judice, we are unable to provide any specific comments at this time. However, we remain in ongoing discussions with govt of Karnataka to resolve the issue amicably,” a statement by SBI said.
PNB has also issued a similar statement saying “the bank is committed to an amicable resolution of the matter” and is in discussion with state govt.
Responding to the statements, a finance department official said: “We have no prejudice against the banks and are ready to negotiate. If the banks own up responsibility and settle our losses, we are ready to reconsider our decision.”
Finance department is said to have issued a directive on Aug 12 to all govt departments asking them to cease transactions with SBI and PNB, but no action had been initiated to withdraw funds already held with the two banks.
On Wednesday (Aug 14), however, state govt ordered all its departments, boards, corporations, public sector units, and universities to withdraw their deposits and investments from SBI and PNB accounts forthwith, and suspend all further transactions with the two banks.
Govt also directed all state institutions to close their accounts in these two banks, submit the certified closure report and send details of deposits and investments in the prescribed format to the finance department by Sept 20.
Karnataka Industrial Area Development Board had deposited Rs 25 crore at Rajajinagar branch of PNB in Nov 2012. Following the maturity of deposit term, the bank returned only Rs 13 crore, citing misappropriation of the remaining Rs 12 crore by bank officials.
Similarly, in 2013, Karnataka State Pollution Control Board had deposited Rs 10 crore with State Bank of Mysore (now merged with SBI) at Avenue Road branch.
However, the bank adjusted the deposit against a private company’s loan, based on fake certificates, and subsequently refused to return the deposit.
Both the cases are still pending in court.
(With agency inputs)
