Why Karnataka government has suspended transactions with SBI, PNB
What's the story
In a dramatic move, the Karnataka government has issued an order to suspend all transactions with the State Bank of India (SBI) and Punjab National Bank (PNB).
The directive was approved by Chief Minister Siddaramaiah and issued by the state's Finance Secretary.
It instructs all state departments to shut their accounts with the central government-backed banks and immediately recover their deposits.
Extended impact
Directive extends to public enterprises and institutions
The order also prohibits any further deposits into these banks.
The directive is not only limited to state departments but also extends to public enterprises, corporations, local bodies, universities, and other institutions.
The order states, "Termination of accounts held in the State Bank of India and Punjab National Bank by state government departments, public enterprises, corporations, local bodies, universities, and other institutions."
Misuse allegations
Allegations of misuse prompt government action
The decision to suspend transactions with SBI and PNB comes in the wake of allegations regarding misuse of government funds deposited in these banks.
Despite prior warnings and communications about these allegations, the issue remained unresolved.
This prompted the Karnataka government to take the drastic measure.
This suspension will cause immediate disruption to government operations, potentially delaying payments to vendors, salaries, and other financial transactions.