State Bank of India (SBI) is likely to merge at least one of its associate banks with itself, by the end of this year, chairman Pratip Chaudhuri told FE. India’s largest bank is currently evaluating which of its subsidiaries would be the right candidate.
“The only thing that has held us back in the past is that the merger cost is about R1,000-3,000 crore. Now that our capital is close to R1 lakh crore, we can easily consider,” he said.
Managing director S Vishvanathan, who is in charge of the associate banks, is currently in the process of finalising which associate bank will be considered for merger first, Chaudhuri said. Vishvanathan will be submitting his report somewhere in July-August and on the basis of this report, the merger procedure could start somewhere in September, PTI had reported earlier this month.
According to Chaudhuri, the merger will help SBI increase its network as each bank can bring in 700-1,000 locations.
“Even if we pay R1 crore per branch, it is worth it. And now integration is much easier because the systems are all the same, the symbol and signage are the same, even at a transactional level there is commonality,? he said.
Once the right candidate is decided upon, the bank will then have to consult the employees and employee associations so that the transition is seamless, Chaudhuri said.
State Bank of Mysore, State Bank of Patiala and State Bank of Travancore would be the target associate banks for merger. SBI did first-ever amalgamation of its associate State Bank of Saurashtra in 2008 followed by State Bank of Indore in August 2010, but in each of those cases the bank faced opposition from employee unions that dragged the merger process.
In May, finance minister P Chidambaram had asid that the banking industry needed some mergers so that India could have two or three global entities.
?We have seen bank mergers lead to too-big-to-fail entities,? he had reportedly said.
In the annual monetary policy, the Reserve Bank of India had said it would release a discussion paper on banking structure in India by end-June 2013.
The discussion paper, among other things, would cover issues such as consolidation of large-sized banks with a view to having a few global sized banks and desirability and practicality of having small, localised banks as preferred vehicles for financial inclusion.