July 20, 2006
PSU Banks in India Planning Outsourcing
Different segments of the industry have acknowledged the benefits of outsourcing their businesses in order to register higher growth as well as reduce costs. Financial companies, Software companies, Legal firms and Pharmaceutical companies are leading the outsourcing business. In a significant development, two public sector banks in India received the green signal from the finance ministry to outsource non-core work like salary payments and recruitment.
According to finance ministry sources, outsourcing of non-core functions could help the nationalized banks in using their workforce for sanctioning loans and recovery of bad debts. The private banks had used direct sales agents for a series of activities ranging from giving loans to issuing credit cards and accepting deposits. However, they had to stop depending on outsourced staff following a directive from the Reserve Bank of India. Outsourcing of core services is not permitted. However, outsourcing of non-core services will definitely open more options before public sector and nationalized banks.
The Times of India reports that -
The issue is going to be discussed by finance minister P Chidambaram when he meets bank chiefs on Friday. But officials said that the government did not want to force any bank to embrace the outsourcing culture and was merely trying to create the environment for those who want to exercise the option.
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