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State Bank of India (SBI) has decided to stick solely on its internal team to suggest cost-cutting measures and has terminated the contract with international management consulting firm Arthur Andersen.

SBI had appointed Arthur Andersen in November last year to suggest steps that the bank can take to bring down its expenditure.

"However, following an internal analysis done by the bank, it was felt that an in-house team would more competent and decided to go ahead on its own," said sources.

The in-house team had been working on ways to cut costs for few months and the banks had already started implementing suggestion given by the group. The bank is targeting to cut costs by at least by 12-15 per cent during this fiscal, said sources.

 

Over the last few years, the bank management is of the view that operating cost in proportion to profits and number of employee is very high.

"The cost was eating into the profits of SBI and thus there was a strong need to reduce the expenses incurred by the it," said sources.

According to an internal study by the bank, in 1996-97 all staff expenses amounted to Rs 1,150 crore which works out to nearly Rs 49,000 per employee.

"It is thus imperative to have a strict control over expenses which is growing at a rate higher than the bank's operating income," said sources.

SBI's cost-cutting exercise will not only look at containment of expenses, but would also work towards reducing the levels of overheads across all items of expenses.

For this purpose, the bank is likely to focus on areas such as communication, consumption of electricity, transport, travels, stationary, out sourcing of services and post-and- telegram expenses, said sources.