The Karnataka government has temporarily paused the implementation of a circular that directed the withdrawal of deposits and restricted further deposits in all branches of Punjab National Bank (PNB) and State Bank of India (SBI), the state government said in a statement.

The state government has paused the implementation of its circular for the next 15 days. The state government on Saturday said that both the banks have submitted written representations to the government on August 16, seeking additional time to resolve the matter.

“After considering the banks’ requests, the Honorable Chief Minister has directed officials of the Finance Department to keep the circular in abeyance for 15 days. This will allow the banks sufficient time to address the issues and redress the concerns of the government,” the statement issued by the Karnataka government read.

The state government conveyed the officials to ensure transparency and accountability in all the dealings, as per the statement.

The Karnataka government had directed all of its arms to restrict the deposits in all branches of both the central government-owned lenders.

The directive came after the observations made by the Public Accounts Committee on July 2, 2024, and August 6, 2024, which indicated an alleged fraud in branches of these banks.

According to the state government, the Karnataka State Pollution Control Board (KSPCB) and the Karnataka Industrial Area Development Board (KIADB) had made fixed deposits that were not repaid as a result of alleged fraud in the bank branches. This prompted the state government to take action.

“Despite prolonged correspondence and meetings, these issues remained unresolved since 2012-13,” the Karnataka government said.

Going further, the state government added in the statement that ensuring transparency and accountability in all its dealings remains a priority.

“We will continue to monitor the situation and take appropriate action to protect the interests of all stakeholders,” the statement added.