In an unprecedented event, the government of Odisha has taken the surprising step to exclude three significant private sector banks—HDFC Bank, ICICI Bank, and Axis Bank—from its roster of accepted financial institutions. This policy shift is a consequence of reported unsatisfactory conduct while implementing various government initiatives in the past couple of years, as well as their consistent failure to satisfy necessary banking standards.
Insiders from the Finance Department revealed that the government of Odisha has been keenly observing the role and effectiveness of these banks in launching and managing state-endorsed welfare programs and developmental projects. Despite continuous monitoring and reminders, these banks have reportedly fallen short of making any significant progress in their reach, effectiveness, and overall performance concerning public service delivery.
Their performance posed concerns not only regarding the implementation of specific schemes but also in relation to other vital banking benchmarks. As a result of this, the government has chosen to take a more stringent approach towards this matter.
The Finance Department has dispatched an official circular to all the state departments, directorates, main offices, agencies, government-operated institutions, public sector undertakings (PSUs), societies, as well as universities. This circular instructs these bodies to immediately halt all business proceedings with the three aforementioned banks.
The instructions incorporate specific actions, including the immediate removal of HDFC Bank, ICICI Bank, and Axis Bank from the approved panel of banks eligible to manage government deposits and perform business transactions. There is a prohibition on making any further deposits or moving government funds into accounts kept at these banks.
Moreover, the circular explicitly demanded the immediate closure of all existing accounts—whether they are savings, current, or belonging to other categories—held by any entity affiliated to the government in these three banks.
This strategy employed by the Odisha government displays a clear intent to enforce improved accountability and effectiveness within financial collaborations, particularly those handling public funds and delivering services. The exclusion of these banks conveys a strong message to other financial institutions regarding the necessity of aligning their operations with the state’s development and transparency objectives.
The Finance Department’s message leaves no room for ambiguity, only financial establishments that exhibit robust operational performance and proactive engagement in managing welfare schemes would be permitted to conduct government-related business in the future.
The introduction of this policy is anticipated to inspire an environment of enhanced competition and productivity amongst the financial institutions functioning within the region. This effect will be seen both in their performance and their push towards better alignment with the goals and values of the state government.
The move is a strong reminder for all financial institutions about the importance of delivering efficient services, particularly when public money is involved. It puts the onus on the banks to shoulder the responsibility of not just safeguarding the public funds but also directing them towards the welfare of the society.
It is clear that the government of Odisha is determined to make accountability the cornerstone of their approval process. The decision to exclude these three banks is an unprecedented step that sets a precedent for other states in India.
The impact of this decision is far-reaching. It extends beyond the government and the banks to the banking landscape in the state. What remains to be seen is how these banks respond to this policy shift, and what measures they take to regain their position on the approved list.