Page 41 - Banking Finance March 2019

ARTICLE

A STUDY ON

'THIRD COST'

IN BANKS

(Rent, Taxes and Lighting)
(Schedule 16 - Operating Expenses

of Banks' Balance Sheet)

Except TWO public sectors banks, rest of the banks bottom n earlier days, primary channel of banks i.e., BRANCH
line is badly affected on account of decrease in spreads I is used to sell the bank products, to complete the total
(yield on advances minus cost of deposits), increase in processing of bank products and back-office
overheads, increase in technology costs and increase in operations. This channel is a costly one. Over a period
provisions for non-performing assets etc. for the financial of time for the sake of customer convenience and also to
year ending 2018. Now banks are focusing on controlling reduce the high cost of primary channel, banks had
overheads i.e., controllable costs in addition to recovery developed many alternate or alternative delivery channels.
of non-performing assets to achieve the profits.
One of the objectives of introduction of number of alternate
Age of alternate delivery channels in Indian banking delivery channels in Banking System like ATMs, Cash Deposit
system has completed one and half decade. Most of the Machines (CDMs), Internet Banking, Mobile Banking,
customers were migrated from branch banking to Central Processing Centres (CPCs) for Retail Advances (for
alternate delivery channels. Hence, there is scope to Home Loans, Car Loans, Mortgage Loans, Education Loans
control overheads (Rent, Taxes and Lighting) by better etc.), CPCs for MSME Advances (for Working Capital and
utilization of alternate delivery channels instead of branch Term Loans), Liability Processing Centres (for processing of
banking model / channel. Savings Bank Accounts, ATM Cards, Cheque Books etc.),
Trade Finance Processing Centres (for processing of LCs, BGs
About the author and discount of Trade Bills), Cheque Clearing Processing
Centres, Pension Processing Centres, Exclusive Locker
Er. Sunil Dasari Branches and Call Centres etc. is to reduce the per
Senior Manager - Faculty transaction cost of bank transactions and also for customer
Union Bank of India convenience. Now CPCs became manufacturing units for
Staff Training Centre processing various bank products and as a result it reduces
Bhopal
footfalls of bank customers at bank branches. Present

BANKING FINANCE | MARCH | 2019 | 41