Karnataka Govt snaps ties with PNB, SBI on row over two term deposits

BENGALURU: Punjab National Bank (PNB) and State Bank of India (SBI) announced on Thursday that they are in discussions with the Karnataka government to amicably resolve an ongoing dispute involving two term deposits.

The situation took an unexpected turn when the Karnataka government decided to sever all ties with the two state-run banks.

“As the matter is currently sub-judice, it would not be prudent to make any specific comments. However, the bank is committed to an amicable resolution and is in discussion with the Government of Karnataka,” PNB stated.

Banks in talks with Government

PNB’s response came after the Karnataka government issued a circular directing all state government departments, public sector units, boards, corporations, local bodies, universities, and other institutions to close all accounts with PNB and SBI by September 20.

The dispute with PNB centres around a fixed deposit of Rs25 crore opened by the Karnataka State Industrial Board at PNB’s Rajajinagar branch in September 2014. After the term ended, the bank released Rs13 crore but withheld the remaining amount, citing pending court cases. The matter is currently being heard in a local court.

A similar dispute involves SBI. The Karnataka State Pollution Control Board had opened a fixed deposit of Rs10 crore with the former State Bank of Mysore, which merged with SBI in 2017. The state government alleges that before the deposit matured, the funds were adjusted against loans taken by a private company based on forged documents.

SBI has also confirmed that it is in talks with the Karnataka government to resolve the issue.

“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 the Government of Karnataka to resolve the issue amicably,” SBI said in a statement.

The Karnataka government’s circular, dated August 12 and signed by PC Jaffer, Secretary in the Finance Department, cited the incidents involving PNB and SBI as the basis for the action.

“It is informed through this circular that the state government’s departments, public sector units, corporations, boards, local bodies, universities, and other institutions should withdraw all the deposits/investments made in all the branches of the SBI and the PNB and no deposits/investments should be made in the future,” the circular stated.