Public sector banks have to get their strategy for turnaround of loss-making branches approved by their respective boards.
A directive to this effect has been given by the Department of Financial Services in the Finance Ministry to state-owned banks including SBI and IDBI, official sources said.
Most banks already have strategy in place for turnaround of loss-making branches. But they have not been approved by their respective boards.
The Finance Ministry is of the view that it is imperative that the strategies devised by the respective bank are implemented in right earnest. This would help convert all loss-making branches in the bank into profit centres.
Turnaround of loss-making branches would also help improve morale of employees, besides boosting financial parameters such as net profit, net interest margin and business per employee
The banks have now been asked to approve various measures for enforcing personal responsibility of regional/zonal manager concerned for achieving the targets.
The boards may also consider suitably incentivising those regional/zonal managers who achieve the targets, the Department of Financial Services has said.
The Financial Services Secretary, Mr D.K.Mittal, had in April this year said that the Government was open to the idea of scaling down operations of loss-making branches of public sector banks and insurance companies.
“If there are loss-making branches, then we have to re-look them. Ultimately, branches have been set up to earn,” Mr Mittal had then said.