Mumbai: In a major restructuring effort, Punjab National Bank (PNB) is removing an intermediary tier of zonal offices for faster decision-making processes. The decision to close 26 zonal offices, spread across mostly northern India, follows a recommendation from consultant Boston Consulting Group aimed at making decision-making swifter.

The New Delhi-based bank, India’s fourth largest lender in terms of asset base, will have three organizational layers now —headquarters, regional offices and branches. The PNB board, which met in Hyderabad on Wednesday, cleared the plan. “The headquarters will focus on business strategy, while regional offices will be the controlling tier and the branches will do business," said a senior PNB official who did not wish to be named.

Inclusive growth: Under chairman and managing director K.C.Chakrabarty, PNB is making a big push for financial inclusion.

The zonal offices have been acting as the intermediary between the headquarters and 47 regional offices.

“It (the restructuring) aims at centralizing the decision-making processes in line with the private sector banks," said a banking analyst with a multinational brokerage who did not want be named.

According to the bank’s executive, 2,000 employees at the zonal offices will now focus on sales. Marketing of financial products has been a weakness of state-run banks in India that account for close to 70% of the banking industry. New private and foreign banks in India mostly use their branches as sales offices, but state-run banks continue to follow the old pattern where there is virtually no distinction between a back office and a branch.

Under new chairman and managing director K.C. Chakrabarty, the bank is making a big push for so-called financial inclusion and it is expected some of the zonal employees will also be used for that.

With large-scale computerization, this trend has slowly been changing and some of the banks have started recruiting exclusive sales staff for marketing products.

PNB has 58,000 employees, spread over 4,569 branches. Some 1,100 branches and 85% of its business are handled through core banking solution, a software that enables branchless banking. In other words, customers of these 1,100 branches can conduct their banking transactions in any of these branches. The bank plans to expand the software to 3,000 branches.

“In the long term, it would be very beneficial for the bank, but in the short term, there might be some blockages as a lot of procedures would need to be changed," says Hatim Broach-wala, an analyst with Mumbai-based Khandwala Securities Ltd. “PNB will also be able to reduce its operating expenses significantly."