The government has issued a stern diktat to state-owned banks to put off avoidable expenditure and reduce costs amid the coronavirus pandemic. The move comes days after Punjab National Bank purchased three Audi cars worth Rs 1.30 crore for travel purposes of its top management.

The Finance Ministry has asked Public Sector Banks (PSBs) to cut administrative costs such as purchase of staff cars, refurbishment of guesthouses, and interior decoration items, etc.

The ministry has directed PSBs to put the financial resources to more productive uses, without having an adverse impact on the core business activities, which is the need of the hour.

The heads of all PSBs have been issued a detailed advisory by the Department of Financial Services (DFS) to make a reduction of 20% in their expenditure pertaining non-core business operations. "The 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 and 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," the cautionary note by DFS stated.

Banks are advised to defer avoidable expenditure beyond the current financial year, including purchase of staff cars, except where unavoidable, the advisory said.

DFS has also directed the banks to postpone expenditure on decorative, non-functional items for the interiors of non-customer facing premises like administrative offices and back offices, and refurbishment of guest houses. Further, the banks have been asked to effect a significant reduction in expenditure on activities other than those pertaining to core business activities.

Besides, DFS has also 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, profitability, and the cost-to-income ratio of the bank's operations and the occupancy level of guest houses," the advisory added.

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

"Top management may also suitably sensitise senior executives to give effect to this advisory in letter and spirit," it said.

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

Amid the pandemic, the finance ministry has asked all ministries and departments not to initiate any new scheme in the current financial year.

Earlier this month, the ministry said there was a need to use resources prudently in these difficult times.

Schemes that have already been approved for the current financial year will remain suspended until March 31 next year, or further orders.