N Biren Singh has called on departments in his government to practice austerity.

Manipur Chief Minister N Biren Singh reshuffled the state cabinet to take over the key departments of finance, public works and power today, a day after the Reserve Bank of India directed nationalised banks to stop honouring bills and cheques issued by his government.

The central bank had taken the step in response to an "overdraft" of Rs 300 crore arising from withdrawal of funds in excess to pre-determined arrangements.

An official statement from the Chief Minister's Office said Mr Singh has taken over the departments of finance (including taxation and excise), public works and power as an "interim measure". Claiming that huge amounts were found to have been withdrawn by the public works and power departments from March to May while the Model Code of Conduct for the Lok Sabha elections was still in force, it said that a thorough investigation of sanction procedures and financial management will be conducted in all key departments.

The move comes at a time when party sources are hinting at differences that have crept up between the Chief Minister and State Public Works and Power Minister Thongam Biswajit Singh - the second-most powerful person in the Manipur cabinet.

On June 11, the RBI had asked banks to halt payment to the Manipur government with effect from the following day. "The account of the government has been overdrawn in excess of the arrangement agreed upon with the Reserve Bank of India. It has, therefore, been decided as per extant procedure that payments be stopped to the government of Manipur with effect from June 12," it said in a statement.

At a meeting held yesterday, the cabinet authorised the Chief Minister to take "necessary disciplinary action" to ensure a culture of financial prudence in government departments. Employees, however, have been assured that timely disbursement of salaries and benefits will not be affected.

(With inputs from Agencies)