The Punjab government has cut ties with HDFC Bank and has stopped doing any business transactions. This means no government department in Punjab is allowed to use HDFC Bank for any official work. The government says HDFC Bank did not cooperate or follow orders related to important and urgent financial transactions.
An official order has been sent to all government departments and officials in Punjab, telling them to stop using HDFC Bank. As part of the order, the Punjab Government has also outlined a list of 23 alternative banks it will now conduct business with. Some of these banks are SBI, PNB, ICICI, Axis Bank, Bank of Baroda, and others. The Punjab State Cooperative Bank is included as a special case.
At present Punjab is facing a growing financial crisis. The state has a huge debt of over ₹3.27 lakh crore. More than 20% of its yearly budget is spent just on paying interest and repaying this debt. The central government (the Union Government) has reduced Punjab’s borrowing limit by ₹16,676 crore. This action was taken because Punjab has a lot of unpaid bills, such as ₹5,444 crore in unpaid power subsidies, ₹4,107 crore in old power subsidy dues, ₹4,151 crore borrowed earlier for the power sector, and ₹1,976 crore borrowed in earlier years. Due to these pending dues, the central government decided Punjab should borrow less.
Punjab needs money, and loans are its main way of staying afloat. But now it’s allowed to borrow much less than it planned. On top of that, it has to deal with bank cooperation issues, like the one with HDFC Bank. The state is now trying to manage its money more strictly.
Copy of an official order issued by Punjab government.
