FinMin shoots off letter to SBI, other PSBs, says defer avoidable expenditure on buying staff cars, decorations, entertainment

Taking cognizance of the Punjab National Bank (PNB) purchase of Audi cars for its three directors, the Finance Ministry has directed public sector banks to follow strict austerity measures. In a directive issued on Wednesday the Finance Ministry directed State Bank of India (SBI) and other PSBs to spend only on those heads that are very important. In short, it asked the PSBs to spend only in those variables that fall under the essential services of the banking system.

Here are the following heads in which the ministry of Finance has directed the PSBs to reduce their expenses:

1] Expenditure on cars: The Ministry of Finance has said that banks should not buy new staff cars until and unless it's essential as any unnecessary expenditure may lead to trouble in providing banking services to the customers.

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2] Control on decoration: The Ministry of Finance has also suggested banks to carve themselves away from the interior and other types of decoration of their administrative offices. It also suggested banks to stop spending on their building maintenance and guest house decorations, etc.

3] Publicity and entertainment expenses: the ministry has directed public sector banks to reduce their expenses in this variable by at least 20 per cent. It also suggested PSBs to reduce their expenses on tour and meetings. It has suggested PSBs to take advantage of social media to reduce their publicity expenses.

4] Hotel, Guest House expenses: The ministry asked PSBs to organise their meetings and other events inside the bank guest house or administrative offices instead of going for big hotels. It would help them reduce their expenses on hotel payments. It also asked PSBs to audit its expenses on the rented cares being used and avoid suing rented cars if possible.

5] Unnecessary expenses on staff amenities: The Finance Ministry also urged the PSBs to avoid giving some staff amenities like rented house, rented cars, furniture, etc. In fact, it directed all PSBs to bring their proposal in their next board meeting and implement it on an urgent basis.

See Ministry of Finance Order Below:

The industry insiders are of the opinion that the Ministry of Finance had to issue such directives regarding austerity measures as majority of the PSBs are under huge stress of the rising NPA (Non Preforming Asset). In such a situation, the Government of India (GoI) is putting money to keep these banks in sound financial condition. As per an assessment done by the Bank of America Merrill Lynch, Indian PSBs are under the heat of Rs 1.25 lakh crore and this money has to be arranged by the GoI to bail them out of this NPA crisis. Since, the GOI is already under financial crunch due to the COVID-19 spread, there is strong need for the Indian PSBs to reduce their expenses.