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The women's doubles combination of Tanisha Crasto and Ashwini Ponnappa also lost in the pre-quarterfinals.
National champion Chirag Sen lost 15-21, 16-21 to Wang Zheng Xing in the decider.
Prannoy lost in straight games, 21-15, 21-5 in the semifinals.
The Kerala shuttler recovered from a slump in the second game to win 21-11, 17-21, 21-18 against Wang Tzu Wei of Chinese Taipei.
It is learned that the delay in releasing the funds is due to the acute financial crisis and the unprecedented restrictions on treasury payments.
H S Prannoy's campaign ended after he lost to Japan's Kodai Naraoka 9-21, 14-21 in the men's singles quarterfinal.
Prannoy, seeded eighth, will now take on third-seeded Japanese Kodai Naraoka.
Young Indian Priyanshu Rajawat also exited the season's last BWF Super 750 event.
The Asian Games bronze medallist Indian, who returned to action after recovering from a back injury, squandered an opening game advantage to lose narrowly to world No. 12 Chen.
Prannoy alleged that the officials of the state sports department or the KBSA did not even bother to send him a congratulatory message when he won a medal at the BWF World Championships 2023 held in Copenhagen, Denmark, in August.