In a firm action, the Punjab government has cut all ties with HDFC Bank on the grounds of negligence and consistent delay in financial transactions. This came as a response after the bank reportedly failed to transfer government funds at the right time, causing disruption of financial operations in several state departments.
Reason behind this step
The state finance department took serious note of HDFC Bank's failure to implement timely fund transfers, particularly in the wake of the government having recently recalled funds given to all departments. Sources say that departments with HDFC Bank accounts were reluctant to repatriate the money to the state treasury, further delaying the government's efforts to manage its finances in the wake of a tightening of finances.
Authorities clarified that HDFC Bank was not complying with time-bound government transaction-related instructions. Such non-compliance, particularly when the state itself is under fiscal pressure from a ₹16,000 crore cut in its borrowing limit from the center this year, had no option but to depanel the bank.
Official communication and next steps
The finance department has issued a formal notice to all secretaries, directors, panchayats, development authorities, and boards that HDFC Bank is no longer empaneled for any government transactions. Departments have been instructed to make all future transactions with other empaneled banks—namely, State Bank of India, Punjab National Bank, Canara Bank, ICICI Bank, Axis Bank, and a few more.
The Financial context
Punjab's fiscal health is already stressed. The state had budgeted borrowing of ₹48,000 crore this year, half of which was to be used for paying earlier debts. The recent reduction in the central government's borrowing limits has further tightened cash management. In such a scenario, any slack in fund transfers can produce a cascading impact on the state's ability to fund critical outgoings.
What led to the crackdown?
At the end of the last month of the first financial quarter, the Punjab government drew money from different departments to cope with pressing expenditures. On June 5, a meeting presided over by the Chief Secretary instructed all departments to remit unspent amounts. But HDFC Bank account-holding departments allegedly held up such remittances, prompting the finance department to sound a strong warning.
What’s next?
With HDFC Bank depanelled, Punjab's government departments have been given the list of alternative banks for their transactions. The initiative is meant to provide smooth, reliable financial management and avoid future disruptions.
This aggressive move reflects the Punjab government's desire for fiscal discipline and prompt financial activities, particularly during a tough economic situation.