'Take out all FDs...': Deepak Shenoy on Karnataka govt ordering closure of accounts with SBI, PNB

Karnataka government directed the government institutions to close their accounts in SBI and PNB over non-refund of deposits. Image: PTI

The Karnataka government on August 14 instructed all its departments, boards, corporations, public sector units, and universities to withdraw their deposits and investments from State Bank of India (SBI) and Punjab National Bank (PNB). This directive followed a financial dispute involving the Karnataka Industrial Area Development Board (KIADB) and the two banks.

The significant move by the government to order closure of all accounts in the public sector lenders caught everyone's attention. Capital Mind Founder and CEO weighed in on the matter through a post on social media platform X (formerly Twitter), stating that the government's decision is a prudent step. Shenoy pointed out that this action may be necessary to uncover any potential irregularities in the handling of government fixed deposits (FDs) by these banks.

Shenoy called for a thorough investigation saying "Karnataka govt tells all govt depts to shut down all deposits with SBI and PNB. This is a good thing. Apparently, PNB hasn't returned one FD for a decade, and SBI allowed a govt FD to be pledged against a private party's loan and invoked it in default, so not paying back govt," Shenoy wrote.

Karnataka govt tells all govt depts to shut down all deposits with SBI and pnb.

This is a good thing. Apparently PNB hasn't returned one fd for a decade and SBI allowed a govt fd to be pledged against a private partys loan and invoked it in default, so not paying back govt.

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How… pic.twitter.com/uY8z27mMxW

— Deepak Shenoy (@deepakshenoy) August 15, 2024

He further suggested that withdrawing all FDs could be a way to expose any other questionable practices. "How many more such shady loans have been taken against govt-owned FDs? One way to find out is to take out all FDs. If it is all clean, the money will come. Otherwise, you can ding the banks in courts."

Shenoy emphasised that the best course of action for the banks would be to proactively ensure the cleanliness of all deposits. "A proactive action by them to verify that all deposits are clean, by returning all the money, is their best hope," he added.

Meanwhile, a day later on August 15, both PNB and SBI issued separate statements. "As the matter is currently Sub-Judice, it will not be prudent to make any specific comment. However, the Bank is committed for amicable resolution of the matter and is in discussion with Government of Karnataka," read the statement issued by PNB.

The order by the Karnataka government came after the denial to redeem Rs 12 crore deposited by the Karnataka Industrial Area Development Board (KIADB) following a scam involving bank employees. A state government circular on August 12 said the meeting with the bank officials did not yield any result and the matter is now sub judice.

Similarly, Rs 10 crore deposited by the Karnataka State Pollution Control Board (KSPCB) was not returned by the bank owing to a scam by the bank officials, the circular said.

"As the matter is currently subjudice, 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," stated SBI.

"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 government circular read.

The government also directed the government institutions to close their accounts in these two banks and submit the certified closer report and send details of deposits and investment reports in the prescribed format to the finance department by September 20, 2024, PTI reported.