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Rediff.com  » Business » Govt pay accounts can leave SBI

Govt pay accounts can leave SBI

April 08, 2006 12:50 IST

In what could cost the State bank of India a substantial chunk of its business with the government, the Reserve Bank of India has given a blanket permission to all central and state government ministries and organisations to shift their accounts from SBI to other banks of their choice in view of the indefinite strike by SBI employees that entered its fifth day on Friday.

The government of Uttar Pradesh has already transferred its accounts from SBI to Allahabad Bank.

The Maharashtra government is also in the process of shifting the accounts of its treasuries. It is currently gathering district-wise information about branch networks of various public sector banks to decide on the bank to which it transfers its accounts. It expects to finalise the new bankers by Monday.

Out of 255 treasuries, the accounts of 172 are with SBI, 47 with State Bank of Hyderabad and 27 with Bank of India. In Mumbai and Nagpur, the state government has already bypassed SBI network and used the facilities available with RBI, state additional chief secretary, OP Gehrotra, said.

SBI's managing director T S Bhattacharya said: "We cannot hold back customers from shifting to other banks when we are not in a position to serve them."

Both Bhattacharya and bank's chairman AK Purwar have appealed to the employees to end the strike.

Under section 21 of the RBI Act, government business is handled by the RBI. It is, however, delegated to public sector and private sector banks, which handle the operations as agency business.

Therefore, these central and state government entities need to take RBI's permission for shifting their accounts to other banks. The permission is given for shifting accounts relating to salaries, pensions, diplomatic transfers, defence business and collection of taxes.

Most of the investors in SBI's Rs 2,500 crore (Rs 25 billion) Tier-II bonds maturing on April 1, 2005 are stuck with cheques which cannot be sent for clearing as operations at all the 9000-plus branches of SBI have come to a standstill. Mutual funds, provident fund trusts and pension funds had invested in these bonds.

A senior SBI official said the bank is exploring some alternative arrangements to ensure the bond holders get the principal and interest due to them.

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Anindita Dey & Abhijit Lele in Mumbai
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