In a bid to mellow down the rising menace of Non-Performing Assets (NPAs) in public sector banks, Ministry of Finance has directed the banks to shut their loss-making branches.
According to the official sources, banks have been advised to pursue the closure of its loss-making domestic as well as international branches as a part of its capital saving exercise.
The Centre believes that there is no point in running the loss making branches and putting an extra burden on the balance sheet, so banks should not just analyse its bigger savings but also lay emphasis on small savings like these for improving overall efficiency, said an official from Ministry of Finance.
Many public sector giants including State Bank of India (SBI) and Punjab National Bank (PNB), have already made their moves in this regard. Indian Overseas Bank has also streamlined its regional offices in the country by reducing 10 regional offices from existing 59 with an objective of optimum utilisation of resources and reduction in administrative costs.
As far as the overseas branches are concerned, the ministry has directed the lenders to discuss consolidation and take a final call on closing some unviable operations.
According to Ministry, there is no point running too many branches in a single country. It said banks can rather think of exploring a single subsidiary formed with five-six banks coming together for conserving capital and realising economy of scale.
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