The Punjab Govt de-empanels HDFC Bank in a significant administrative move, citing the bank’s repeated failure to execute time-bound financial directives. This decision, now legally enforced, bars all state departments, corporations, and administrative bodies from conducting financial transactions with the private banking institution.
The directive, issued by the Secretary Expenditure-cum-Director of Institutional Finance and Banking, followed multiple instances where HDFC Bank delayed urgent state-mandated transactions. The Punjab Government stated that such lapses disrupted critical economic functions at a time when the state is already facing mounting fiscal pressure.
“Given that the HDFC Bank has not complied with the state government’s directive to execute specific time-bound transactions, it has done so in violation of the law. Therefore, HDFC Bank is hereby de-empanelled,” the official order confirmed.
Unspent Funds & Delayed Remittances
The decision follows closely on the heels of a state directive asking departments to return unspent allocated funds to the treasury. Departments with accounts in HDFC Bank reportedly faced hurdles in transferring these funds promptly, compounding the government’s liquidity woes.
An emergency meeting chaired by the Chief Secretary on June 5 had taken stock of the situation, directing all departments to immediately return unused funds. The delays by HDFC Bank in executing even basic remittance functions were flagged during the meeting.
23 Banks Now Empanelled to Handle State Finances
Following HDFC Bank’s removal, the Punjab Government has released an updated list of 23 empanelled banks authorized to carry out official transactions. A variety of public, commercial, cooperative, small-finance, and regional rural banks are among them:
Public Sector Banks:
- Central Bank of India
- State Bank of India
- Punjab National Bank
- Punjab & Sind Bank
- Canara Bank
- Union Bank of India
- Bank of India
- Bank of Baroda
- UCO Bank
- Indian Overseas Bank
- Indian Bank
- Bank of Maharashtra
Private and Cooperative Banks:
- ICICI Bank
- Axis Bank
- IDBI Bank
- Kotak Mahindra Bank
- Yes Bank
- IndusInd Bank
- Federal Bank
- Capital Small Finance Bank
- AU Small Finance Bank
- Cooperative Bank of Punjab State (designated as a special instance)
Regional Rural Bank:
- Punjab Gramin Bank
These banks have been instructed to ensure full cooperation with government protocols and complete financial transparency.
Punjab’s Borrowing Capacity Slashed by Centre
The HDFC Bank fallout comes against a backdrop of severe fiscal constraints in Punjab. The Central Government recently slashed the state’s borrowing limit by ₹16,676 crore, bringing down its open market borrowing request of ₹48,000 crore to just over ₹31,000 crore.
Key reasons for the cut include:
- ₹5,444 crore in unpaid power subsidies
- ₹4,107 crore in power subsidy arrears
- Additional borrowing of ₹4,151.6 crore related to the electricity industry
- ₹1,976 crore in unpaid borrowings from previous years
So far, from April to December, Punjab has only received permission to borrow ₹21,905 crore out of the ₹35,307 crore it had requested.
Tightening Financial Discipline
In light of this deepening crisis, the Punjab Finance Department has adopted stricter fund-monitoring practices. All departments have been directed to:
- Avoid unnecessary retention of funds
- Route all transactions through approved banks
- Submit compliance reports on treasury fund deposits
What’s Next for HDFC Bank?
While HDFC Bank has not yet issued an official response to the development, the fact that the Punjab Govt de-empanels HDFC Bank could significantly affect the bank’s public-sector operations and set a precedent for banking policies in other Indian states.
Punjab’s move underscores a growing trend toward accountability in government banking partnerships, especially in fiscally constrained states facing rising debt and shrinking borrowing capacity.
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