Public sector banks (PSBs) that are already burdened with bad loans have been directed by the Finance Ministry to maintain austerity and not indulge in luxury.

Noting that the banks have been buying expensive cars, the Department of Financial Services, in a recent missive to Chief Executive Officers of all PSBs, said: “Expenditure on vehicles needs to be rationalised in particular as many banks have policies permitting purchase of vehicles on depreciated value.”

The Vigilance Commission too has highlighted that banks have been buying expensive cars.

Accordingly, banks will be expected to take permission from their Board of Director for new vehicle purchases.

The Finance Ministry has also frowned upon the practice of buying expensive vehicles when officers are close to retirement and selling them the cars at depreciated value.

“PSBs may also consider selling old cars at market price through a transparent process,” it said.

PSBs are expected to follow government guidelines on austerity and cutting down frivolous expenditure. In the past years, the Finance Ministry too has asked state-run lenders to refrain from giving Diwali gifts to government officials or holding conferences in five start hotels.

But the issue has now taken a larger dimension given the huge stressed assets with these lenders.

Gross non-performing assets (NPAs) of state-run lenders rose to ₹3.61 lakh crore in December 2015 from ₹2.67 lakh crore in March last year.

Sources said the Finance Ministry has also advised public sector banks to maintain austerity and try to avoid expensive celebrations or conferences while the bad loan problem remains unresolved. The issue is understood to have come up for discussions in recent meetings as well.

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