Mumbai: The Uddhav Thackeray-led Maha Vikas Aghadi government has mandated all its departments to shift their accounts from private to state-run banks, in a move that seemingly disregards the Reserve Bank of India (RBI)’s recommendation.
Deputy Chief Minister Ajit Pawar-led finance ministry issued the order Friday. It will come into effect from 1 April.
According to the order, all departments will have to close their accounts in cooperative and private banks, and open new ones with nationalised banks.
These include salary accounts, grants and other financials of government departments, sub-departments, civic bodies and the various financial corporations of the Maharashtra government.
ICICI Bank, in which the Brihanmumbai Municipal Corporation holds deposits worth Rs 329 crore, will be among the losers.
The move comes days after the RBI wrote to all state governments not to transfer their deposits out of private sector banks, citing misplaced apprehensions about the safety of deposits with private lenders.
Also read: Yes Bank moratorium to be lifted on 18 March as govt notifies reconstruction scheme
How it will be done
The Maharashtra finance department has intimated the heads of all the bodies under it to implement the orders immediately.
Sources in the government revealed that the State Bank of India (SBI) is the preferred choice for the Shiv Sena, NCP and the Congress.
The other banks which will get the government accounts include Syndicate Bank, Bank of Baroda, Corporation Bank, Bank of Maharashtra, Bank of India, Punjab National Bank, Central Bank of India, Andhra bank, Union Bank of India and the Indian Overseas Bank, said the sources.
According to the plan, the SBI will initially disburse the salaries and pension of the state government employees. Opening accounts with the other nationalised banks will follow suit depending on the preference of the department.
Presently, the salaries and pension of the state government employees are being disbursed through private, cooperative and nationalised banks.
The decision has come after a directive from the Narendra Modi government made it compulsory for all state governments to disburse salaries, pensions and grants only through nationalised banks.
The RBI too has laid down strict regulations for financial dealings of state governments through private banks, said sources in the finance department.
In line with past actions
The Maharashtra government’s latest decision is only the latest in a series of similar moves.
In December 2019, Chief Minister Uddhav Thackeray moved the salary accounts and other grants of the police department out of the Axis Bank to the State Bank of India following a war of words between the Shiv Sena and Amruta Fadnavis, wife of former CM Devendra Fadnavis and a senior executive with Axis Bank. An estimated two lakh accounts worth over Rs 11,000 crore were moved out.
In the same month, the Thane Municipal Corporation also shifted its salary accounts from Axis Bank to SBI.
This month, the Brihanmumbai Municipal Corporation (BMC) — the richest civic body in the country — decided to move its accounts from various private banks to SBI.
In January 2020, the BMC had opened new accounts in nine banks — private, cooperative and nationalised — for deposits worth Rs 6,300 crore.
With the new order in place now, the BMC has to act fast to shift these accounts, said the sources.
Also read: Don’t withdraw funds from private banks, it’ll hurt financial stability, RBI tells states
Where can i find this particular circular?
Is Canara Bank included in the list of the PSU banks?
Bold and fair decision by Thackeray.
Good decision on the part of the Maharashtra govt. It is only the public sector banks that are catering to the needs of masses across the length and breadth of India. They have their branches in all the nook and corners of the country. They open their branches even in the remotest corners and serving the people. Whereas private banks only cater to a class of people who have a high net worth. Private sector banks never give priority sector advances and they only give secure advances with a high rate of interest.
The very banking methods were paralysed by the decision taken against the nationalized banks by earlier governments are showing the worst impact now in the sector..the nationalized are now saviors for the dying private banks who rode on the unethical banking in the past. A good lesson is thought now and all should follow Maha Government decision..it is an eye opening to all Pvt sector banks and they are bursted now..
These people will sink great psu institutions by their crony capitalism
Great move
That’s honesty.
Honest govt keeping money safe.
Great .
Painful, but necessary. Cooperative banks are a ticking time bomb which the RBI should defuse in good time. There was a conflict of interest in placing state government funds in Axis Bank. One understands the RBI’s anxiety to prevent what amounts to a mini run on private banks. However, they have brought it upon themselves. It is possible that it is leaning on a number of banks to rescue Yes Bank, something which they may not have done on purely commercial considerations.
I agree with this move. The RBI has lost all credibility as a regulator primarily because of incompetent people running it.