SBI and PNB shares are in the spotlight as the Karnataka government freezes transactions due to embezzlement allegations
On August 16, SBI and PNB shares stayed the same at Rs 805 and Rs 113, respectively, after the Karnataka government decided to freeze all transactions with these banks. This action follows claims of embezzlement involving government funds. Both banks are trying to resolve the issue with the state government.
The banks said they can’t comment further since the matter is still in court. The government has also asked state institutions to close their accounts with these banks and send certified closure reports, including details of deposits and investments, to the finance department by September 20.
The controversy started because SBI and PNB failed to return deposits to the state government. In November 2012, the Karnataka Industrial Area Development Board deposited Rs 25 crore at PNB’s Rajajinagar branch. When the deposit matured, the bank only returned Rs 13 crore, claiming that Rs 12 crore had been misappropriated by its officials.
In 2013, the Karnataka State Pollution Board deposited Rs 10 crore with the State Bank of Mysore (now part of SBI) at its Avenue Road branch. The bank used fake certificates to adjust the deposit against a private company’s loan and then refused to return the money.
This ban comes at a time when the banking sector is facing a ‘battle for deposits,’ with concerns about increasing liabilities being a major topic. As of July 26, total deposits in scheduled commercial banks grew by 10.6% year-on-year, which is slower compared to the 13.7% growth in credit.
Recently, both the finance minister and the RBI governor stressed the importance of banks improving their deposit base to meet rising credit demands and ensure stable liquidity. The finance minister encouraged banks to create innovative and appealing deposit schemes, while the RBI governor stated that banks have the flexibility to set interest rates to attract more deposits.
So far this year, SBI’s shares have jumped more than 25%, and PNB’s shares have increased by 18%. In contrast, the benchmark Nifty 50 index has risen by over 11% during the same time.
