Odisha withdraws letter warning state units to be wary of keeping money in banks

Pressured by the Centre and the banking industry, the move only adds to the confusion about the country’s financial health and does little to instil any confidence in the acumen of the powers that be

Odisha withdraws letter warning state units to be wary of keeping money in banks

NH Web Desk

The Naveen Patnaik-led Odisha government on Friday withdrew a notice that had asked public sector units and state-operated units to be extra careful while keeping money in banks. This only adds to the confusion about the country’s banking and finance sector’s health and does little to instill any confidence in the acumen of the powers that be.

According to a report in The Telegraph, the Naveen Patnaik government has been under immense pressure from the Modi govt and the banking industry to withdraw the direction, sources said. “We had to withdraw it following a lot of complaints,” a senior official said.

“There is no reason for anyone to get apprehensive about the financial health of the banks in general,” read a note released by AKK Meena, principal secretary to the government (finance).

Earlier on October 21, Meena himself had issued a letter while referring to media reports about the situation of some banks. “The government departments, PSUs or agencies have to be very careful while keeping deposits in any bank…. It shall be the personal responsibility of the concerned authority for such deposit.”

“Withdrawal of money from treasury without sufficient grounds (such as immediate need for utilisation…) and depositing the same in bank account shall be construed as a financial irregularity,” read the October 21 letter.

The letter by the Odisha principal secretary, “It is to be mentioned in this context that each depositor in a bank is insured up to maximum of Rs 1 lakh for both principal and interest amount held by him the same capacity and same right as in the date of liquidation/ cancellation of banks’ licence or the date of which the scheme of amalgamation/ merger/ reconstruction comes into force under deposit insurance and credit Guarantee Corporation of India Limited, a subsidiary of Reserve Bank of India. Therefore, in the eventuality of closure of any bank the deposits are insured only up to Rs 1 lakh and not beyond that.”

The directive from the Naveen Patnaik government comes at a time when deposits of many people have been locked up in PMC Bank in Maharashtra, following unearthing of a scam.

“It is to be clarified that the state government does not have any view of the fiscal health of any particular bank. That comes under the domain of Reserve Bank of India,” reads the new directive.

“The circular dated 21.10.2019 was only meant to avoid opening of new accounts by DDOs (drawing disbursing officers) and shifting of government funds meant for welfare and developmental activities of government without any reasons from one bank to another.”

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