Expenditure Control In Public Sector Banks

Indian Overseas bank has announced that they have decided to close 12 Regional Offices to curtail expenditure. Many banks are opening many Regional and Zonal offices and increasing load on their income . It is for  the first time that a bank IOB has taken a wise step to reduce number of regional offices. In near future public sector banks in general and IOB in particular  will have to close hundreds and thousands of unprofitable and unviable branches which have been opened just to please Ministers and to get promotion.

Very soon CBI will expose top officials of these banks who are lavishly spending public money in conducting various meetings in five star hotels. They can save crores of rupees by conducting video conferencing officials. To control expenditure , some banks curtail expenses on purchase of newspaper in administrative offices or on power consumed in offices but they do not feel any shame in spending lacs of rupees on organising meetings in five star hotels  or on extending warm welcome to dignitaries on their visit to any place. They do not feel any hesitation in spending lacs and crores of rupees in distributing gifts to VIPs and government officials.

There is a proverb in English , " Penny wise and pound foolish"  which in Hindi says " Gau marker Juta Dan". This is public sector banks which uses its valued and scarce manpower  to earn a few crore of rupees as commission in selling insurance products and cause loss of hundreds of crores of rupees in writing off bad loans or sacrifice hundreds of crores of rupees which should have otherwise been recovered from wilful and recalcitrant defaulters of bank loan. This happens in public banks only where they use their talented manpower in useless and worthless works just to please politicians and top bosses . Top officials of these public banks are awarded with free foreign trip when they achieve target fixed for mobilisation of insurance business . The cannot get similar trip when they achieve targets of deposits and advances for banks.  Private banks do not encourage bank officials to indulge in non-banking activities at the cost of health of bank's valuable assets.

In near future ,these banks will have to curtail expenses on staff cost and huge establishment cost incurred on the  regional offices and Zonal offices. Many branches are short of manpower and they are unable to extend desirable good customer service to their customers and they are unable to take care of their assets and recover money from loan defaulters. On the other hand ,there are plenty of staff posted in each regional offices who have practically no work to do.

I am unable to understand why do they need  so many staff when everything is automated. Banks need to redeploy their manpower and plan their posting in profitable way. I do not understand why is there need of so many administrative offices to control banks when every work is automated. Before computerisation, there used to be controlling offices and there was justification for it to some extent. But in modern era , there is no need to have so many regional offices.

Lacs of rupees is spent by every regional office of each public bank only to enjoy comfort of service even though they are in loss or on the verge of incurring loss. There is in fact no control on expenditure.

In the name of business , some of offices of public banks  are wasting public money for no fruitful outcome. I think  top officials of these banks will learn lesson only when their sickness increases or when CBI like authority exposes their sweet scam. Majority of public sector banks are facing pressure on their profit due to every increasing volume of bad assets .

Need of the hour is that Public sector banks learn how to use manpower profitably  and make effort to make each branch a profit earning entity. Or else , they should declare each branch as social welfare or Charity organisation. They have to use available resources properly and if needed learn from private banks. It is ironical that top officials who have worked for two to three decades and more are not in a position to introduce proper appraisal system, proper use of manpower , proper structure of branches and on other aspects and they appoint Consultants to advice them on these subjects. In this way banks spend crores of rupees to these so called consultants every year to change the image of bank or improve productivity but the real outcome is big Zero.

ED and CMD assign the work of reformation and transformation of bank to Consultants and they get safe retirement causing huge loss to bank. When three decade long experienced officer cannot suggest ways for improvement , how young consultants who do not understand even ABC of banking can suggest appropriate ways to improve health of sick banks is a million dollar question which Finance Minister and RBI should answer.

Lastly I would like to say when IOB could not ensure quality of assets of the bank even by s many Regional Offices , how will they now save the bank from further disaster. keeping in view the mindset and culture of bank, I may say that IOB will further add fuel to fire only.

IOB to shut 10 regional offices to improve efficiency-Hindu Business Line-15.01.2016

Public sector lender Indian Overseas Bank (IOB) today said it will rationalise the number of its regional offices by closing 10 such offices to improve efficiency.

“Our Bank at its meeting held in 12.12.2015 decided to rationalise the number of regional offices in the country by reducing 10 regional offices from existing 59. The estimated date of closure is 1.3.2016,” Indian Overseas Bank said in a clarification to the BSE.

It further said, “The closure of regional offices is for optimum utilisation of resources and is administrative decision within the bank... it will result in substantial reduction in administrative costs.”

Indian Overseas Bank said it has 59 regional offices and 7 zonal offices, which provide support and guidance to branches which are undertaking business activities and are required to monitor the performance of branches.

In October last year, IOB said Reserve Bank has initiated a prompt corrective action on the bank.

The RBI specified certain regulatory trigger points, as a part of prompt corrective action (PCA) framework, in terms of three parameters — capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.

Gross NPA of the bank rose to 9.40 per cent for the quarter ended June 30. IOBs gross non-performing assets rose to 8.30 per cent at the end of March 31, from 4.84 per cent a year ago, according to the provisional RBI data taking into account domestic operations of banks.