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M. Ramesh

CHENNAI, March 21

GOING by the statistics provided by the Indian Banks' Association, private sector banks seem to be doing better than the PSU banks in controlling establishment expenditure. Among the private banks, the new ones are on the top.

When you talk about establishment expenses in a bank, you are referring to cash outgo in the order of hundreds, or even thousands of crores of rupees. Take State Bank of India for instance. Its `establishment expenses' in 2000-01 were as Rs 6,012 crore, up 34 per cent from Rs 4,478 crore in the previous year. A saving of half a percentage point could add Rs 30 crore to the bottomline!

In that year, SBI and its seven other associate banks spent Rs 7,832 crore on administration, which was 32 per cent more than the previous year's figure of Rs 5,926 crore.

The State Bank and its associates were among those banks with high growth in establishment expenditure.

In 2000-01, five PSU banks (Canara Bank, Punjab National Bank, Bank of Baroda, Bank of India and Central Bank of India) had establishment expenditures above the Rs 1,000-crore mark. Their figures grew respectively by 31, 23, 28, 34 and 16 per cent.

All the PSU banks together spent Rs 20,975 crore, 28 per cent above the previous year's figure of Rs 16,395 crore.

In contrast, the old private sector banks saw only a two per cent rise in their establishment expenditure, spending Rs 1,038 crore versus Rs 1,017 crore in the previous year.

Within the 23 `old private sector banks', however, some spent more while many actually managed to cut their administration costs although their businesses grew.

For example, Nedungadi Bank and Bharat Overseas Bank saw administration costs rise over 10 per cent, while some such as Karur Vysya Bank and Federal Bank shrank spending on establishment.

The new private sector banks spent Rs 249 crore as against Rs 163 crore in 1999-00 - a rise of 52 per cent. But then, this growth was on a much smaller base.

Where these new private sector banks score a point is in spending in relation to the total business. Establishment expenditure as a percentage of total business (deposits plus advances) is seen the highest for HDFC Bank, at 0.47 per cent, followed by IDBI Bank at 0.43 per cent. For most of the other banks, it is around 0.2 per cent.

Contrast this with the PSU banks. Only two banks are under the one per cent bracket - Oriental Bank of Commerce and Corporation Bank. For four banks, (State Bank of Bikaner, StateBank of Mysore, Syndicate Bank and Dena Bank) establishment costs were well over two per cent of their total business. Most of the others are in the 1.5-1.9 per cent range.

The old private sector banks are somewhere in between. Only two banks - Bank of Rajasthan and Catholic Syrian Bank were above 1.5 per cent. Only three others (South India, Lakshmi Vilas and Nedungadi) were above one per cent. All the rest contained their establishment expenses to below one per cent of their turnover.

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