Govt directs PSBs to bring down non-core expenditure by 20%

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Updated: Jun 18, 2020 10:04 AM

PSBs have been asked to cut spends on travel by adopting digital means of communication and making effective use of locally available administrative officers.

The order comes after the top management of a large PSB bought three high-end luxury cars in May, as per a report by the Press Trust of India.The order comes after the top management of a large PSB bought three high-end luxury cars in May, as per a report by the Press Trust of India.

The department of financial services (DFS) has told chiefs of public-sector banks (PSBs) to put on hold avoidable expenses in FY21, such as purchase of new cars, and cut non-core expenditure by at least 20% amid the Covid-19 outbreak.

In a June 7 letter, which has been reviewed by FE, the DFS also asked the banks to defer revision of perquisites, such as lease or rent amounts and entitlements to assets like vehicles and furniture.

The order comes after the top management of a large PSB bought three high-end luxury cars in May, as per a report by the Press Trust of India. “In the context of the Covid-19 pandemic, it is necessary that banks take appropriate measures to ensure productive use of their financial resources for core business activities,” the letter said. It directed the deferment of expenditure beyond the current financial year where this can be done without adversely impacting business operations, such as purchase of staff cars, except where unavoidable; expenditure on decorative, non-functional items for the interiors in non-customer-facing premises like administrative offices and back offices and refurbishment of guest houses.

Banks have been asked to effect significant reduction in spending on activities other than those pertaining to core business activities. A cut in expenditure to the tune of 20% year-on-year or more may be effected on activities or heads of expenditure like entertainment and publicity. The order seeks the spending cuts through “efficacious use of social media and press releases, and by pooling resources with other PSBs for common publicity campaigns where appropriate”.

PSBs have been asked to cut spends on travel by adopting digital means of communication and making effective use of locally available administrative officers. They must organise meetings using external infrastructure only in case infrastructure internal to the bank or other PSBs (for instance, administrative offices and training institutions) is either unavailable or unsuitable from a functional, logistical or locational angle.

In order to rationalise expenditure, the bank boards’ executive panels or management committees may review the composition of the existing fleet of vehicles engaged on hire, while taking into account functional imperatives and the profitability and the cost to income ratio of the bank’s operations and the occupancy level of guest houses.

The advisory from the DFS further asks for deferment in revision of entitlements and perquisites, such as those to fixed assets like vehicles and furniture and lease or rent amounts admissible for hired residential accommodation. “The bank may place this advisory before its Board at its next meeting, and issue appropriate instructions internally. Top management may also suitably sensitise senior executives to give effect to this advisory in letter and spirit,” the letter said.

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