The Karnataka State government has temporarily, for a fortnight, withdrawn the order suspending banking activities with the State Bank of India (SBI) and Punjab National Bank (PNB) following a request from them seeking time to sort out the issues.

A circular issued by Finance Secretary PC Jaffer said that Vinod Jaiswal, the Chief General Manager of SBI, Bengaluru Circle, and Deepak Kumar Srivastava, Zonal Head of PNB, had submitted a request on Friday seeking 15 days to rectify the alleged misappropriation of funds.

The circular also noted that the Additional Chief Secretary and some senior officers of the State Economic Department met with officials at the Karnataka State Pollution Control Board (KSPCB) and the Karnataka Industrial Areas Development Board (KIADB) to discuss these claims.

‘Misappropriation of funds’

The Karnataka government had earlier ordered its departments to suspend transactions with the SBI and PNB. State departments, public enterprises, local institutions, universities, councils, and other institutions were directed to close their accounts and immediately recover their deposits because of the alleged misappropriation of funds by these two public sector banks.

The order addressed an alleged fraud involving the KIADB and a fixed deposit of ₹25 crore at Punjab National Bank’s Rajajinagar branch for one year in 2011. However, after the term ended, PNB allegedly only released ₹13 crore. The KSPCB had deposited ₹10 crore at the State Bank of Mysore, which the Government alleged was adjusted to the loans taken by a private company using forged documents. The amount is yet to be recovered.

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