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PSU banks,insurers to shut loss-makers?

Govt may ask PSUs to shut down loss-making branches as part of a rationalisation process.

Written by Agencies | New Delhi |
April 9, 2012 6:03:50 pm

The government may ask public sector undertaking (PSU) banks to either relocate or shut down loss-making branches as part of rationalisation process.

“This is a part of an ongoing dialogue not only banks but insurance companies. If there are loss-making branches then we need to re-look at it why they are there. If that needs working out a business strategy,may be relocating it,may be scaling down of staff all the needs to be looked at,” Financial Services Secretary D K Mittal said,when asked if the government has asked banks to submit report on loss-making branches.

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“Ultimately branches have been to be set up to earn. If they (loss-making branches) have been there for sometime say 12 months,then I think there is case to re-look at it,” he said on the sidelines of CII event here.

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There are about 87,000 branches of public sector banks across the country.

Rising interest rate and slowdown in economy has impacted the repayment capacity of borrowers,especially small and medium enterprises leading to rise in NPAs of banks.

The non-performing assets (NPAs) of banks have risen to Rs 1.27 lakh crore till December 2011. Of this public sector banks’ gross bad debt jumped over 51 per cent to a whopping Rs 1.03 lakh crore in 2011.

The gross NPAs of public sector banks has increased from Rs 68,597.09 crore at December 2010 end,to Rs 103,891.27 crore as on December 2011.

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