Odisha Withdraws ‘Very Careful’ Warning Against Bank Deposits

Bhubaneswar: Four days after issuing a directive to departments and public sector units (PSUs) to be “very careful” while keeping deposits in “any bank”, the Odisha government did a volte face with a clarification that it does not have any view on the fiscal health of any particular bank.

The Clarification

“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,” a note issued by the principal secretary, finance, AKK Meena said on Friday.

“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,” he added.

The Possible Reason

Sources said the Naveen Patnaik government had come under severe pressure from the Centre and the banking industry after issuing the directive. “We had to withdraw it following a lot of complaints,” a senior official said.

What Did The October 21 Order Say

“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.”

The PSUs, departments and agencies were told that “funds for state-run schemes should be used directly from the treasury through the integrated finance management system (IFMS) without being parked in any account.”

The Principal Secretary’s directive also stated that there should be sufficient reason of utility for withdrawing the money from IFMS and depositing it in the bank. If there is no good reason, it will be considered a financial irregularity.

The directive further stated that reports about the fiscal health of these banks point towards apprehensions regarding the safety of deposits in some of these banks, especially since the deposits here are insured only up to Rs one lakh. This being so, it becomes all the more imperative for PSUs to ensure the financial health of the banks before making government deposits in them. Those who do, shall do it at their own personal risk.