Maharashtra closes one account in Axis Bank, more to follow

The Maharashtra Government has decided to shut down one account it holds in the private sector lender, Axis Bank, as per official notification, issued in Mumbai on Wednesday.

The accounts of the National Cyclone Risk Mitigation Project (NCRMP) lying with Axis Bank at its Nariman Point Branch will be closed with immediate effect and the funds shall be transferred to a new account to be opened with State Bank of India's Churchgate Branch.

The development comes in the wake of the Yes Bank crisis which stunned the country's financial sector last week, preceded by the Punjab & Maharashtra Cooperative Bank last September 2019.

Following this, official sources had said that henceforth the state government would bank only with reputed public sector lenders to ensure the safety of all its funds.

Accordingly, instructions were issued by Chief Minister Uddhav Thackeray to the concerned officials/departments to do the needful last week.

Simultaneously, it came to light how Rs 1,125 crore of at least three civic bodies was stuck in the Yes Bank crisis.

Thereafter, the state sought details from all government departments, civic bodies, state corporations, autonomous bodies and others on their exposure to all the private sector banks.

It may be recalled that both these issues were first highlighted by IANS (March 6 & 7), respectively, as the Yes Bank crisis unfolded leading to the arrest of its founder Rana Kapoor early morning of March 8 by Enforcement Directorate.

A recent cabinet meeting presided over by Thackeray also discussed the issue of probable risks and shifting all accounts in private banks to PSBs.

It was decided that for the security of public money, it would be prudent to shift all accounts in all private banks to the PSBs immediately.

An area of immediate concern is the ongoing farmers loan waiver scheme as many banks in rural areas hold accounts with Yes Bank.

With Wednesday's decision on the NCRMP accounts, more government departments are likely to follow suit in the next few days.

In December 2019, Mumbai Mayor Kishori Pednekar had said the civic body would consider shifting some of its accounts from a private sector bank to the safer option of government banks as a precautionary measure.