Page 39 - Banking Finance April 2019

ARTICLE

by ATM department of the bank. Low hits and higher down capital expenditure and revenue expenditure exceeds the
time is always additional cost to the bank. Whenever the budget levels.
own bank customers are using more of other banks ATMs,
the ATM department should analyze the reasons and shift Optimum utilization of own premises
the low hits ATM to these areas, thereby it is beneficial to Some banks are having own premises, due to
the bank and customers service will improve and the bank decentralization in the organization structure or decrease
need not pay service charges to other banks, while own in business levels and opening of number of banks in
customers using other bank ATMs.
surrounding areas, usage of branch premises decrease
substantially, these premises are to be reviewed by the
Trimming of the branch premises controllers and explore the possibility of shifting Central
wherever feasible Processing Centres, Currency Administration Cells to own
premises to save the cost of RTL. Whenever in head office
Trimming the branch premises is one strategy to reduce
and zonal offices surplus of space is available on account of
overheads of rent and electricity costs. Forecasting of decentralization of organization structure, CPCs can to be
business sometimes may not be achieved by the bank due shifted to these locations from rented premises.
to various reasons. Once the desired business levels are forth
coming / achieved, alternatives available to the bank is to If CPCs or branches shifting are not possible, the premises
reduce the cost of overheads i.e., RTL. Solution in this case
can be hiring to other commercial organizations. Thereby
is either de-hiring or trimming of the branch premises. This revenue will be generated to the bank. There is a scope for
clause to be included in lease agreement with the landlord more centralization of banking operations due
while hiring the premises. implementation of Information Technology in banking
industry. Private sector banks are forefront in this regard
The same strategy is applicable to the branches where it compared to the public sector banks. From time to time
reaches to optimum / saturation point of business and no best banking practices of private / international banks are
further growth is possible. The solution is to trim the branch to be studied, find out the suitability and implement the
premises in order to reduce the cost of overheads. Some of same to improve the customer service and cost reduction
the branches are holding like old records, furniture etc. for of banking operations.
so many years in the branch premises. On account of this
branches are paying higher rent by holding waste assets. If Develop Standard Operating Procedure
retention limit of old records is over and furniture which is
not useful, either it may be shifted to needy branches or to (SOP) for Rent, Taxes and Lighting Costs
sale furniture through auction, thereby premises can be used Standard Operating Procedure (SOP) is a tool to the
in a better manner or trim the branch by de-hire the excess Controller of the branches to do the activity in a defined
space to reduce the overheads. manner. It gives an idea to the operating staff, how to
complete the specific task. SOP is to be circulated to all the
Budgetary control system for Rent, Taxes branches for their reference, thereby it is a tool or aid for
the branches to follow the guidelines of the bank without
and Lighting any deviation.
Budgetary control system is need of hour to control RTL
costs in banking industry. Every year budgets are to be given Re-design the branch with current
to the controllers of RTL overheads, as these are
controllable costs to a large extent by the bank. Every requirements
quarter or bi-monthly the controllers / head office review After introduction of alternate delivery channels by the
the actual expenditure with budget to the branch / regional banks in large scale, footfalls of the customers are gradually
office / head office etc. While developing budgetary control reducing. Banks are encouraging the customers to use the
system, both capital expenditure and revenue expenditure alternate delivery channels and Head Offices of the Banks
for the branch / regional office / zonal office to be arrived have also allotted targets to the Branches like number of
separately. Corrective action is to be initiated wherever the ATM Cards to be issued, Internet Banking and Mobile

BANKING FINANCE | APRIL | 2019 | 39