PSU banks look to swap branches to reduce costs

NEW DELHI: As part of a focus on boosting the functioning of state-run banks, the government is pushing them to look at operational synergies that also help reduce cost.
Sources said minister of state for finance Jayant Sinha has held discussions on the issue and quite a few possible steps have been identified, including swapping of branches and a common infrastructure for back-end operations or even having a company that handles the core banking software applications for the lenders based on a fee.
Several banks have a concentration of branches in certain pockets, while the others may be weak in those areas. The plan is to get them to redeploy the branches, which will help save costs and avoid duplication. In any case, the lenders are tapping technology to increase their reach and trying to reduce footfalls into branches.
Given that banks are short of staff and the crunch is going to increase given the large-scale retirement, cost cutting through smarter operations is seen as a key part of the strategy. Lower costs and more efficient operations are expected to help lenders pump in more money into their operations and reduce pressure on capital from the government.
As part of the capital-raising exercise the government is driving banks to leverage the huge real estate assets that they have and State Bank of India has taken the lead in setting up a subsidiary with assets of around Rs 23,600 crore based on the current market value. The government is keen that lenders tap into the non-core businesses to meet their part of the capital requirement.
Excluding the internal profit generation of state-run banks, the capital requirement for the next four years up to FY-19 is likely to be about Rs 1.8 lakh crore.