The State Bank of India (SBI) is likely to put its merger with associate bank State Bank of Saurashtra (SBS) on the backburner. The contentious issue would not be brought up at SBI?s board meeting to be held on May 2, sources said.
It is learnt that the government is also now keen on going slow with the consolidation process in a bid to keep the Left parties satisfied. The merger of SBS with its parent SBI would have been an acid test not only for the government but also for other PSU bank managements.
?We wanted to carry on with the merger process based on the experience of the SBI-SBS merger exercise. However, with this failing to even take off, there is a little chance that there would be other banks looking for mergers,? an industry source said.
Meanwhile, the Raghuram G Rajan committee report released recently highlighted the need for the government to reduce its holdings in the public sector banks and to push for reforms in the financial sector. Though earlier during the year, the boards of the two banks gave their in-principle approval for the merger, there has been stiff resistance from the unions in the banking industry.
The Cabinet has also not taken up the issue. According to the Union Forum of Banks Union, the associate banks of SBI are separate legal entities and therefore an attempt to merge them would lead to major problems. SBI has a capital adequacy ratio of 12.3%.