Finance ministry cautions PSU banks against buying expensive cars

THIS may not go down well with the PSU banks. In a bid to put a check on unnecessary expenses on the part of the public sector banks, the Finance Ministry has warned the public lenders against purchase of "high value" staff cars. The interesting point is that some of these cars are later sold to officials at a depreciated price. "...it has been pointed out by the Vigilance Commission that banks are purchasing high value cars/vehicles," the ministry's Department of Financial Services (DFS) said in a communication to the chiefs of all public sector banks. In line...
with the "prevalent focus" on austerity in public expenditure on administration, the DFS said that it is desirable to rationalise such spending.
The move comes at a time when the PSU banks are grappling with the mounting NPAs.
It also said that the expenditure on vehicles needs to be rationalised in particular as many banks have policies permitting purchase of vehicles on depreciated value.
"Purchase of expensive vehicles particularly close to retirement and their sale at a depreciated price to officers is a matter of concern that has come under vigilance scrutiny," the department said. The DFS has asked state-owned banks to consider selling old cars and other vehicles at "market price through a transparent process".
Public sector banks have been asked to adhere to the April 2007 guidelines regarding purchase of staff vehicles and "to revisit" their policies related to purchase, replacement and re-sale of cars/vehicles in the "best interests" of the bank, with the approval of the respective Board of Directors.
In April 2004, the ministry had permitted banks to purchase new vehicles for replacement or otherwise on "need basis"
The public sector banks have been in news of late for all wrong reasons. From ‘wilful’ defaulter Vijay Mallya to NPAs, the PSBs are caught off guard.
In a related development, the government has informed that public sector banks have written off 38 accounts of Rs 100 crore and above amounting to about Rs 8,000 crore during the nine months of the current fiscal.
As against Rs 8,033 crore for 2015-16, banks had written off 47 accounts of Rs 100 crore and above totalling Rs 13,018 crore in 2014-15, Minister of State for Finance Jayant Sinha said in written reply in the Rajya Sabha.
"Non-performing asset accounts are written off for clearing the balance sheet and enhancing profitability after full provisions have been made within the framework of RBI guidelines and board-approved loan recovery policy of the bank concerned," he said.