Page 44 - Banking Finance March 2019

ARTICLE

On expenditure side the highest cost is "Cost of Deposits" Regional Offices of the bank. On account of merging of
followed by Payment to and Provisions for Employees and Associate Banks and Bharatiya Mahila Bank with SBI, the
the Third Cost is Rent, Taxes & Lighting - RTL (Other than RTL is high. The ideal distance between two branches of
operating expenses relating to insurance business and other bank is 5 to 10 k.m (depends on potentiality of business).
expenditure). Existing premises area of branches, ATMs, But in case of metro and cities some of bank branches are
Head Office, Zonal / Regional Offices spaces and exploring located even less than 1 KM. If these branches are merged
the possibility of shifting Central Processing Centres (CPCs) (i.e., less than 1 KM branches), lot of savings will happen to
to own premises instead of hiring premises or trim the the banks in RTL, staff costs and other overheads.
existing premises by de-hiring are to be reviewed by banks
in order to reduce the overheads under RTL. Taxes and The other alternates available to the banks is to shift some
Electricity costs are directly propionate to the Branch / HO of the cluttered branches located with proximity of 1 to 2
/ ZO / CPC Space. Once space reduces, Taxes and Electricity km distance to unbanked areas, thereby banks it not only
Costs of the Branch will also reduce proportionately. saving the overheads of RTL but also increase in the business
of the bank. Best strategy to reduce high amount RTL is
As per Annexure-III TOP five Banks spent on Rent, merger of nearest branches. While merging, study the
Taxes and Lighting (RTL) for the Financial Year branch profile based on locational advantage, rent and
ending 31.03.2018 is as follows: electricity paid by the branches, staff pattern, type of
customers, potential of business in particular place and
Name of the Bank Rent, Taxes and Lighting profit contributed by of these branch etc. then take a
31.03.18 (Rupees in Crs.) decision for merging the branch by increase in the grade of
State Bank of India (SBI) 5,140 the nearest branch or shifting the branch to unbanked areas
Bank of Baroda (BOB) 1,011 in order to increase in business levels of the bank and to
control RTL.
Canara Bank 922
Punjab National Bank 739
Percentage of Increase in RTL over
Bank of India 670
31.03.17
Analysis The following chart shows the percentage of increase in
Rent, Taxes and Lighting costs of the banks in 31.03.18
Highest amount of RTL spent by SBI followed by BOB. This
is due to more number of branches, ATMs and Zonal / financial year over 31.03.17 financial year.

44 | 2019 | MARCH | BANKING FINANCE