Cabinet nod for merger of 5 associate banks with SBI

PRIME Minister Narendra Modi's Cabinet on June 15 approved the takeover by State Bank of India of several subsidiaries, a government source was quoted as telling PTI. This is a first move to consolidate the country's struggling public sector banks.

According to earlier proposal, the largest lender was due...

to take over five units plus state-run Bharatiya Mahila Bank. The latter was formed for women in 2013.

SBI has five associate banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.

The merged entity will create a banking establishment, which can compete with the largest in the world with an asset base of almost Rs 37 lakh crore, with 22,500 branches and 58,000 ATMs as on December 2015.

SBI alone has close to 16,500 branches, including 198 foreign offices spread across 36 countries.

“The merger of SBI and its associate banks is a win-win for both. While the network of SBI would stand to increase, its reach would multiply. One can expect efficiencies to be created from rationalization of branches, common treasury pooling and proper deployment of a large skilled resource base. Currently, no Indian bank features in the top 50 banks of the world. With this merger, some visibility at global level is likely to increase. Customers of associates and subsidiaries of the Bank will also be beneficiaries. Any introduction of new technology by SBI would simultaneously be available uniformly. The scale of operations and common cost would get rationalized. Overall, the synergies being pooled at one place are going to be a big positive,” said Arundhati Bhattacharya, chairman, SBI.

SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged. SBI has maintained since then that it would merge the others as well but none of its initiatives fructified due to lack of capital — which was pegged at least Rs 2,000 crore for each bank — and stiff opposition from the employee unions.

Last month, Minister of State for Finance, Jayant Sinha, had said, "We have 27 public sector banks right now. When the dust settles, I think we will have, may be, 8-10 very competitive banks. Some of them are going to be large scale global players, while some are going to be differentiated banks."