The central board of State Bank of India (SBI) on Tuesday passed a resolution to seek the government’s nod to start negotiating the merger of its five subsidiary banks and Bharatiya Mahila Bank (BMB) with itself. The balance sheet of the consolidated bank will be around Rs 37 lakh crore, up from SBI’s R28 lakh crore at present.
The five subsidiaries are State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Patiala, State Bank of Travancore and State Bank of Hyderabad. SBI had earlier merged with itself two subsidiaries — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010. In Q3FY16, all subsidiary banks posted an aggregate net loss of Rs 181 crore. Meanwhile, BMB was created by the erstwhile UPA government to lend primarily to women.
Speaking to a business news channel, Arundhati Bhattacharya, chairman, SBI, called it a very good move as it consolidates the group and makes it more efficient. “There can be huge efficiency that we can get out of the merger and considering the fact that we can be a much greater and much bigger bank, definitely that itself will have quite a bit of advantage,” Bhattacharya said.
She explained that following the merger, SBI’s lending costs could come down by around 100 basis points. This, she said, would be mainly because the deposits with the subsidiaries are taken at a higher rate at present. “The associate banks have fixed assets to the tune of Rs 4,000 crore which will also add to the capital,” she added.
Reacting to the news, Vishwas Utagi, vice-president, All India Bank Employees Association said that bank unions would protest before the offices of the subsidiaries on Tuesday and Wednesday. “Also, all employees of the associate banks will go on strike on May 20,” he said in a statement.
Bhattacharya said in the entire group, the attrition rate is around 13,000 people on a yearly basis, so whatever little overlaps there might be will get resolved in the next 12-18 months.
According to a senior official present in the meeting, the negotiations can begin only after government approval. “Under Section 35(1) of the SBI Act, the bank requires permission from the government to start negotiations for acquiring any bank including its subsidiaries,” the official said.
The SBI Act states, “The State Bank may, with the sanction of the Central Government, and shall, if so directed by the Central Government in consultation with the Reserve Bank, enter into negotiations for acquiring the business, including the assets and liabilities, of any banking institution.”