PSU banks on austerity drive to fight bad loans

FEELING THE PINCH Apart from easing on expansion, lenders are also cutting down on travel and accomodation

NEW DELHI: The government has directed public sector banks to adopt cost-cutting measures to compensate for mounting bad loans and anticipated slower credit growth in 2014-15, and the lenders have started taking steps to this effect.

Government banks, which have been under stress due to rising non-performing assets (NPAs), had until two years ago aggressively expanded their network in global markets. In the current financial year, however, they are going slow on expansion, and are cutting down on travel and accommodation costs as well.

“Most banks have decided to hold their global expansion plans to save costs and focus on reducing NPAs,” said the chairman-cum-managing director of a public sector bank who did not wish to be identified.

“All banks are looking at ways to reduce their operational costs Mounting non-performing assets and slow credit growth have put government banks under pressure

Till two years ago they were expanding aggressively in global markets, but are going slow this year

PSU banks are set to hive off

and they are adopting their own ways. There is no one formula for all banks, though most banks have gone slow on expansion and travel plans among other things,” a senior government official said.

The state-owned banks are also set to hive off their non-core businesses such as insurance and mutual funds to raise resources. Each bank will present its own plan for this exercise, which will be a part of the overall recapitalisation of banks.

To be in line with Basel-III norms, `2,40,000 crore needs to non-core businesses such as insurances and mutual funds to raise resources

Banks have been asked to come up with individual plans to shore up revenues

The government is set to dilute its stakes in state-owned banks soon

be infused as equity into stateowned banks by 2018.

Basel-III is a set of reform measures according to which banks are required to shore up their capital and improve risk management.

While the government is expected to hit the markets soon to dilute its holdings, the finance ministry has also directed lenders to identify and monetise noncore assets to garner revenues.

As of March 2014, NPAs in government banks have risen to 4.72% or `2,16,729 crore. This was 3.84% in the year-ago period.