The Karnataka government has decided to withdraw a circular that ordered its departments not to do business with the State Bank of India (SBI) and Punjab National Bank (PNB) after both the state-owned lenders repaid Rs 22.67 crore of embezzled funds along with a year’s interest.
On August 12, the Karnataka finance department directed all departments, boards, corporations, universities, local bodies, and public sector undertakings to sever ties with the two banks. The government alleged the banks were uncooperative in recovering the embezzled Rs 22 crore. Four days later, the government suspended the circular.
“SBI returned Rs 9.67 crore, and PNB returned Rs 13 crore, both with one year’s interest, pending the outcome of court cases,” an official said.
Also read: SBI, PNB in talks with Karnataka govt on decision to close bank accounts
The circular stemmed from two fraudulent transactions. The first involved a Rs 25 crore fixed deposit made by the Karnataka Industrial Area Development Board at PNB’s Rajajinagar branch on September 14, 2011.
Even after the deposit term expired, PNB allegedly released only Rs 13 crore, with no resolution over the past decade.
Also read: Explained: Why Karnataka govt has cut ties with SBI, PNB
The second case concerns a Rs 10 crore fixed deposit by the Karnataka State Pollution Control Board with erstwhile State Bank of Mysore, which merged into SBI, which was allegedly misused to settle a private company’s loans using forged documents.
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