The finance ministry on Wednesday urged all state-owned lenders to tighten their spending and reduce avoidable expenditure, amid the covid-19 crisis.
The ministry said that expenses can be deferred, without adversely impacting the core business operations of banks and suggested reducing expenditure by 20% on year or more in areas such as entertainment, travel and organizing meetings, among others.
“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," finance ministry’s department of financial services said in a letter to heads of all public sector banks.
Mint has reviewed the copy of the letter.
A senior government official told Mint that the letter is an advisory to the banks, which has to be considered by their boards in the next meeting.
The ministry also asked the lender to rationalize expenditure in non-core business areas and asked banks’ management committee to review occupancy level of guest house, composition of existing fleet of vehicles that have been hired, while ‘taking into account functional imperatives and the profitability and cost to income ratio of the bank’s operations’.
The development comes days after the finance ministry asked all departments and ministries to not initiate new schemes in the current financial year. However, schemes and funds sanctioned under the recently announced relief measure schemes--Pradhan Mantri Garib Kalyan Package, Aatmanirbhar Bharat Abhiyan package--and any other special package or announcement will be attended to. Schemes already approved for the current financial year will also remain suspended till March 31, 2021.
“It may be appreciated that in the wake of the covid-19 pandemic, there is an unprecedented demand on public financial resources and a need to use resources prudently in accordance with emerging and changing priorities," the finance ministry’s expenditure department had said earlier this month.
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