The order said the process should be completed by September 20.
Facing allegations of misuse of funds from government accounts, the Karnataka government has issued an order suspending all transactions with the State Bank of India (SBI) and Punjab National Bank (PNB). Both of these banks are owned by the Central government.
The Finance Department of the Karnataka government has directed all state departments to close their accounts with these banks and recover their deposits immediately.
"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 must be terminated forthwith. Additionally, no further deposits or investments are to be made in these banks," the order said.
The order comes against the backdrop of a political slugfest between the Congress-ruled Karnataka government and the opposition BJP over the alleged money transfer scam involving the state-run Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd. The alleged scam had been revealed after the corporation's accounts superintendent, Chandrashekhar P, died by suicide on May 26 and left a note behind.
The note claimed that Rs 187 crore belonging to the corporation was transferred without authorisation and Rs 88.62 crore out of the total amount was then moved to other accounts, including those belonging to IT companies and a cooperative bank based in Hyderabad.
In the order, the state's finance department referred to an alleged fraud involving funds of the Karnataka Industrial Area Development Board. It has been alleged that money had been siphoned off with the involvement of bank officials from accounts in the Punjab National Bank. The government said the case has been pending in courts and several crores have still not been refunded.
Similarly, the Karnataka State Pollution Control Board had deposited money with SBI bank, which was allegedly adjusted along with a loan for a private company using forged documents in 2013. This case is also pending in court.
The order said the process of closing accounts with both the banks and withdrawing funds must be completed by all departments by September 20, and the deputy secretary should be informed.