The State Bank of India (SBI) and Punjab National Bank (PNB) are in discussions with the Karnataka government to resolve a ban that halted all transactions with them. The state government ordered the suspension of business dealings and withdrawal of deposits from the banks on August 12, a move that was reported on August 14.
In their first official comments since the ban, both banks indicated they are working towards an “amicable resolution” but declined to provide specific details due to the matter being sub judice.
“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,” the SBI statement said.
SBI’s peer Punjab National Bank, also had a similar statement and pointed out that it will not be prudent to offer a specific comment on the matter.
“The Bank is committed for an amicable resolution of the matter and is in discussion with Government of Karnataka,” the PNB statement said.
The Karnataka government’s decision followed the banks’ denial to return Rs 12 crore deposited by the Karnataka Industrial Area Development Board (KIADB) and Rs 10 crore from the Karnataka State Pollution Control Board (KSPCB). Both sums were withheld due to a scam involving bank employees.
The government has also directed state departments, boards, corporations, public sector units, and universities to close their accounts with the two banks and submit detailed closure reports and investment summaries to the finance department by September 20, 2024.
The ban imposed by one of India’s most prosperous states comes at a time when the banking sector is grappling with intense competition for deposits, with discussions heavily focused on challenges related to liability accumulation.