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Govt Tells Banks To Suspend New Schemes, Cut Avoidable Expenses This Year

By Staff
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On Wednesday, the government asked state-owned banks to defer avoidable expenditure. Schemes that have already been approved for the current financial year would remain suspended till 31 March next year or till further orders.

This comes in the background of cost-saving measures taken by the government amid the COVID-19 crisis. The finance ministry had made an announcement in the first week of June that only schemes sanctioned and announced under the Atmanirbhar Bharat Abhiyan and other special packages will be attended to and no new schemes would be announced. Also, schemes already approved under the Budget would stay suspended till 31 March 2021.

Govt Tells Banks To Suspend New Schemes, Cut Avoidable Expenses This Year
 

"In-principle approval for such schemes will not be given this financial year. Initiation of new schemes already appraised/approved will remain suspended for one year till March 31, 2021," the finance ministry had said.

Meanwhile on Wednesday, in a detailed advisory to the heads of all public sector banks, the Department of Financial Services (DFS) said it was necessary that the banks take appropriate measures to ensure productive use of their financial resources for core business activities.

Avoidable expenses like the purchase of staff cars and refurbishment of guest houses were to be deferred.

The advisory also comes against the backdrop of Punjab National Bank recently purchasing three Audi cars worth over Rs 1.30 crore for travel of its top executives, according to a PTI report.

DFS has also directed the banks to postpone 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.

"Economy in expenditure to the tune of 20 per cent year-on-year or more may be effected on activities or heads of expenditure such as entertainment, publicity, by making efficacious use of social media and press releases, and pooling resources with other PSBs (Public Sector Banks) for common publicity campaigns where appropriate," it added.

 

Besides, DFS has directed banks to avoid travel and adopt digital means of communication as well as make effective use of locally available administrative officers.

"The bank board's executive committee/ management committee 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 said.

DFS, which comes under the finance ministry, has asked banks to place the advisory before their respective boards and issue appropriate instructions internally.

In addition, DFS has directed banks for revision of entitlements and perquisites such as entitlements to fixed assets like vehicles and furniture and lease/ rent amounts admissible for hired residential accommodations.

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