‘Don’t give much bhaav to SBI, PNB’: Deepak Shenoy on Karnataka govt asking depts to shut these deposits. Here’s why

Capital Minds founder Deepak Shenoy has called the Karnataka government's move to remove all state department deposits with the State Bank of India (SBI) and Punjab National Bank (PNB) as "a good thing".

"Accounts held in SBI and PNB by state government departments, public enterprises, corporations, local bodies, universities, and other institutions must be terminated forthwith. Additionally, no further deposits or investments are to be made in these banks," the order said.

'Don't Give Bhaav to SBI, PNB'

In a post on the social media platform X (formerly known as Twitter) on August 15, Shenoy referred to a news report on the Karnataka government's decision and hailed it as a good thing. He also hoped that the banks take "proactive action" to ensure that the issues which caused this development are "fixed completely".

"Karnataka government tells all government departments to shut down all deposits with SBI and PNB. This is a good thing. Apparently, PNB hasn't returned one fixed deposit (FD) for a decade, and SBI allowed a government FD to be pledged against a private party's loan and invoked it in default, so not paying back the government," he noted.

Shenoy added, "How many more such shady loans have been taken against government-owned FDs? One way to find out is to take out all FDs. If it is all clean, the money will come. Otherwise, you can ding the banks in the courts."

"Don't give much bhaav (importance) to SBI and PNB. They will easily survive. It is in their benefit to ensure this problem is fixed completely. A proactive action by then to verify that all deposits are clean, by returning all the money, is their best hope," he stated.

Karnataka Government Order

The Karnataka government has reportedly instructed all its departments, public sector units (PSUs), universities, and subordinate organisations to cease all transactions with SBI and PNB, as per an Economic Times report.

In a circular, the Finance Department highlighted that the Karnataka Industrial Areas Development Board (KIADB) was unable to recover a deposit from PNB, while the Karnataka State Pollution Control Board (KSPCB) faced a similar issue with SBI. Despite multiple rounds of negotiations with the two PSBs, the state’s efforts were unsuccessful, the circular noted. The Finance Department is overseen by Chief Minister Siddaramaiah and department heads are directed to report their compliance to the government.

What Drove The Decision?

The circular referenced concerns raised by audit authorities and the legislature's public accounts committees regarding this issue and said the comes in response to reports of two fraudulent transactions.

• The first case concerns a ₹25 crore fixed deposit made by the KIADB at PNB's Rajajinagar branch on September 14, 2011. Although the deposit term has ended, PNB allegedly returned only ₹13 crore, and attempts to resolve the issue over the last decade have failed.
• The second case involves a ₹10 crore fixed deposit at the former State Bank of Mysore, now part of SBI. The deposit, made by the KSPCB, was allegedly misused to settle loans for a private company using forged documents. Efforts to recover the funds have similarly failed.