Banking News

Maharashtra cabinet allows govt bodies to use private banks, but for limited use

Nearly a year after the Maharashtra government passed a resolution directing all government bodies, authorities and corporations to conduct banking transactions through public sector banks, the state cabinet on Wednesday gave its nod allowing government offices, public sector undertakings (PSUs), and state-run corporations to use private banks for banking services. However, the government has restricted the use of private banks limiting it to the debit of salaries and other allowances of employees.

In March 2020, the finance department had issued a government resolution directed all government bodies to close all banking accounts with private and cooperative banks and open accounts in public sector banks from April 1, 2020. Since April, only public sector banks and later from July 2020, district cooperative banks were used to deposit salaries, other allowances and to maintain funds of a government body.

A senior government official said the earlier resolution was taken in the wake of the crisis faced by one of the prominent private banks — Yes Bank — which had been put under moratorium. “Now the cabinet has limited the use of private banks allowing only salary accounts. This reduces the risk, which was the reason why a directive was issued to close all banking operations with private banks. No funds other than depositing salary will be allowed,” the official said. He added that the contractor’s bank guarantee or reserve fund of any government body will still remain in PSBs.

A statement from the chief minister’s office (CMO) on the cabinet decision said those bodies which opt for private banking service can avail online services through the bank. However, they must ensure that the bank does not charge any additional fees for these services. The cabinet also allowed pensioners to open pension accounts in private banks which have entered into an agreement with the state government before February 28, 2021, the statement said.

A political controversy over bank accounts of several municipal corporations and even state police in a private bank had erupted shortly after Shiv Sena-led Maharashtra Vikas Aghadi came to power in 2019.

Sena leaders had, in December 2019, raised questions over bank accounts of some Sena-run civic bodies in the private bank where former chief minister Devendra Fadnavis’ wife Amruta was a senior executive.

Thane civic body shifted its account of the private bank. The state government, through a government resolution in March 2020, announced the closure of one of its accounts — National Cyclone Risk Mitigation Projects — in the private bank and shifted it to the state-run SBI.

In addition, the cabinet also gave a nod to a proposal providing guarantee for 1,500-crore loan required by the Maharashtra State Cooperative Cotton Growers Marketing Federation.

The government guarantee will be for the 1,500-crore loan which the federation will borrow from Bank of Maharashtra at 6.35% per annum interest rate for ensuring timely payments to farmers on purchase of cotton for 2020-21 season. Due to satisfactory rainfall and favourable weather conditions, around 400 lakh quintals of cotton is expected to be produced this season in the state, said an official.

The official added that with the dipping price of cotton internationally and the hike in the guaranteed prices by the Union government, the federation will have to procure large quantities of cotton at the guaranteed price this season as compared to the last season.

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