SBI Merger: Official Nod by Government

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SBI Merger

SBI merger will finally be a reality. State Bank of India has received the cabinet’s nod for merging of its subsidiaries.

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SBI Merger

All the speculations about the merger of State Bank of India with its associates have now been a reality. The Government of India has officially approved the SBI merger plan.

SBI Merger: No Loss of Salary or Jobs

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SBI Merger: Five Associate Banks

S. No Name of Bank Bank Acronym
1 State Bank of Bikaner & Jaipur SBBJ
2 State Bank of Hyderabad SBH
3 State Bank of Mysore SBM
4 State Bank of Patiala SBP
5 State Bank of Travancore SBT

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SBI Merger: Background

There was a long term proposal to merge all the associate banks into State Bank of India to create one mega bank so as to streamline banking processes.

  • The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with State Bank of India, reducing the number of associate state banks from seven to six.
  • On 19 June 2009, the SBI board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bankof Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of 1.7%.)
  • The acquisition of State Bank of Indore added 470 branches to SBI’s existing network of branches.
  • The total assets of SBI and the State Bank of Indore were ₹9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed by April 2010
  • SBI Indore branches started functioning as State Bank of India’s branches on 26 August 2010.
  • On 7 October 2014, Arundhati Bhattacharya became the first woman to be appointed Chairperson of the bank.

SBI Merger: Long Term Benefits

Benefits Details
SBI Merger Benefit 1 The cost of integration and a potential clean-up of associates’ books will determine whether State Bank of India’s investors have jumped the gun by driving up the stock sharply.
SBI Merger Benefit 2 The consolidated bank is expected to manage costs better the cost to income ratio could reduce by as much as 100 basis points (bps). One basis point is 1/100th of a percentage point.
SBI Merger Benefit 3 A combined treasury could perform better and the lower cost of deposits will boost margins.

SBI Merger:  Challenges

Challenges in Store Details
SBI Merger Challenge 1  Employees are worried that their promotion prospects may be hampered due to curtailment of seniority. Further, rationalization of branches due to overlap may lead to their relocation.
SBI Merger Challenge 2 Director of Associate Banks are worried that after the SBI merger,  the latter’s assets will jump from about ₹21.50 lakh crore to ₹28.25 lakh crore. The number of branches will increase from 16,500 to over 21,500. If one takes into account the branches of BMB, then the total number of branches will go up by another 100. The mergers are expected to go through in the current fiscal.
SBI Merger Challenge 3 As per some senior State Bank of India officials, the country is taking a quantum leap as of now,  there is a necessity to consolidate within the group itself. The merger benefits include getting economies of scale and reduction in the cost of doing business.
SBI Merger Challenge 4 The associate banks are on a totally different footing as they have regional flavour and regional focus. Previously, there have been global banks which collapsed during financial crisis. Therefore, the argument that size is going to determine the future of the bank in a globalized scenario is facile. On the contrary, small banks have survived the crisis due to their nimbleness and the niche areas they operate in.

 

SBI Merger: How Long Will it Take ?

The merger of five associate banks with the SBI will be completes till the year 2018.

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