State Bank of India (SBI) has finally kicked off the much-awaited consolidation process among the public sector banks by proposing to amalgamate its smallest associate bank, State Bank of Saurashtra (SBS), with itself. This is seen as the first step towards the country?s largest bank merging all six associates with it.
The central board of SBI and SBS met here on Saturday to decide on the proposed merger. According to sources, the SBI central board approved the merger proposal and planned to seek the approval of RBI in a couple of days.
SBI chairman OP Bhatt had earlier mentioned that there existed a virtual amalgamation between SBI and its associates, especially in terms of technology platform and several broad policies.
The proposed merger is expected to be a boon to not just the banking sector but also the employees of SBS, who will now be entitled to post-retirement pension benefits. After the merger, the balance sheet size of SBI will grow by about Rs 19,000 crore and it will add some key branches to its fold in the Saurashtra region.
Experts believe that SBI is under threat to lose its leadership position in the next three-four years to ICICI Bank. The largest private sector bank has been growing at over 40% while SBI has managed to grow in the range of 20 to 25%.
SBI is in active consultation with the finance ministry to find ways to raise capital for faster growth. It has already announced plans to raise Rs 50,000 crore in the next three years and Rs 15,000 crore in the current financial year, including a follow-on public offer.
