Karnataka Government Halts Transactions Amidst Banking Dispute

The Karnataka government has directed all its institutions to cease transactions with State Bank of India (SBI) and Punjab National Bank (PNB) after a scam involving bank employees. Both banks are in discussions with the state for an amicable resolution of the matter, which is currently subjudice.

The Karnataka government has issued an order to halt all transactions with State Bank of India (SBI) and Punjab National Bank (PNB) following a scam involving bank employees. The directive, which affects all government departments, boards, corporations, public sector units, and universities, was prompted by the banks' refusal to redeem Rs 12 crore deposited by the Karnataka Industrial Area Development Board (KIADB) and Rs 10 crore by the Karnataka State Pollution Control Board (KSPCB).

In their first official statements since the government order, both state-run lenders have called for an amicable resolution. SBI's statement emphasized the ongoing discussions with the Karnataka government and noted that the matter is currently subjudice. PNB echoed similar sentiments, highlighting their commitment to resolving the issue.

The banking system, already strained by a 'war for deposits', now faces added pressure from the ban by one of India's wealthiest states. Both banks underscore the mutual importance of maintaining their relationship with the state, which has significant borrowings from these financial institutions.

(With inputs from agencies.)