Finmin's cost cutting drive: No more free booze for banks at board meetings

The UPA government is planning a major cost-cutting drive with an aim to cut wasteful as well as planned expenditure in order to attain a lower FY14 fiscal deficit of 4.5 percent of GDP against the targeted 4.8 percent.

In last year’s budget, Finance Minister P Chidambaram had outlined the government would clock a deficit of Rs 5.42 trillion for the financial year, or 4.8 percent of GDP. But overspending, coupled with lower-than-expected tax revenues, meant the government had already reached a shortfall of Rs 5.1 trillion (or 94 percent of the target) in the first eight months of the financial year.

[caption id=“attachment_1264659” align=“alignleft” width=“380”]  Representational image. AFP[/caption]

Sources have told CNBC-TV18 that full-year deficit is likely to come in lower as the government would make up for the shortfall in tax revenues with non-tax revenue sources. Part of the shortfall would be made up with a string of divestments the government has recently initiated. Stake sales in Hindustan Zinc , Balco and Indian Oil , and special dividends by Coal India , SAIL and NMDC , among other public companies, have either been declared or are under process.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

The government has also cut its planned expenditure by Rs 1.10 lakh crore in FY14, or 20 percent of the total outlay, according to CNBC-TV18. Borrowing for the full year is now expected to come at Rs 5.64 lakh crore instead of the Rs 5.79 lakh crore declared in the budget.

And today’s Economic Times says that thefinance ministry also wants state-run banks to curtail wasteful expenditure. Banks will not only have to stop footing the bill for alcohol (board members will need to pay for their drinks themselves) but also for the travel or accommodation of people accompanying board members.

Already PSU banks are reeling under piles of debt. In June 2013, state-run banks had total gross non-performing assets of Rs 1.92 lakh crore, up from Rs 1.64 lakh crore in March.