Odisha Government Drops HDFC, ICICI, and Axis Banks from State Business

In a decisive step aimed at tightening banking accountability, the Odisha government has removed 3 leading private sector banks: HDFC Bank, ICICI Bank, and Axis Bank from its list of empanelled banks authorised to handle state government business and deposits. As per an Economic Times report, the decision was prompted by the banks’ “persisting poor performance” in executing flagship government schemes over the past two financial years.

Mandate for Account Closure and Transfer of Funds

In a letter dated June 21, the state government instructed all departments, directorates, heads of departments, establishments, agencies, PSUs, societies, universities, and other affiliated organisations to immediately close their savings, current, and other running accounts with the 3 banks identified as underperforming. These funds are to be transferred to other banks on the government’s empanelled list.

The letter also clarified that term deposits with the affected banks should not be prematurely closed to avoid interest losses. However, upon maturity, these funds must be shifted to other empanelled banks.

Warning to Other Banks and State’s Deposit Profile

As reported by the Economic Times, the government has warned that other banks may face a similar fate based on their performance. “Depending on performance (achievement in flagship government schemes and general banking performance parameters such as CDR, ACP achievement, etc.), poorly performing banks shall be removed from the empanelled list of banks and well-performing banks will be added to the empanelled list,” the letter stated. CDR refers to Credit Deposit Ratio, and ACP denotes Annual Credit Plan.

According to the same report, Odisha’s share of total deposits was ₹5.64 lakh crore or 2.4% as of March 31, 2025. Term deposits in Odisha banks stood at ₹3.21 lakh crore—higher than Andhra Pradesh (₹2.44 lakh crore) but lower than Kerala (₹3.48 lakh crore), based on data from the RBI.

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Conclusion

The Odisha government’s decision highlights its intent to ensure accountability and performance among banking partners in public fund management. While the financial impact on banks may be minimal due to Odisha’s small national deposit share, the reputational consequences could be significant if performance issues are not addressed.

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