In a move indicating its intent to kickstart consolidation in public sector banks, the Centre is mulling the merger of the 20-month-old Bharatiya Mahila Bank (BMB) with the largest lender, State Bank of India.

Although SBI chairman Arundhati Bhattacharya said she has not been approached about this merger, she feels the move is a “no-brainer”.“I do not know the basis of that (news) and I have not yet been approached about it. Bharatiya Mahila Bank is a Rs 1,000-crore capital…and their loan book must be Rs 150-200 crore with zero non-performing assets (NPAs), along with very few branches. So, it is really a very small entity as of now,” Bhattacharya said on the sidelines of an event on Tuesday.

According to Bloomberg, the finance ministry is said to have floated a proposal to the Cabinet to combine the New-Delhi based BMB with SBI. BMB was set up by the then UPA-led government in November 2013 with an initial capital of Rs 1,000 crore with a clear agenda to cater to women borrowers. It is the only bank fully owned by the government.

The unlisted BMB made a profit of Rs 12.26 crore for the five months of 2013-14, mainly driven by treasury income. Its total business was Rs 175.17 crore, according to its annual report, and a majority of the bank’s Rs-1,000 crore was invested in government securities. According to reports, the bank’s total business grew to Rs 795 crore and its employee strength increased to about 250 in a year since its inception. Its loan book stacked up to only Rs 275 crore in a year. The bank’s network is just about 70 branches now and its business has hardly registered an impressive growth.

However, BMB chairman & managing director Usha Ananthasubramanian had said in April that the bank proposes to open 70 more branches and take its total network to 150 by March 2016. She also said the bank is targeting Rs 4,000 crore of turnover by end of this fiscal.

At the launch of the bank’s first branch in Mumbai in November 2013, former finance minister P Chidambaram had said that the lender would break even in three-four years and its total business would be close to Rs 60,000 crore by 2020. Besides giving housing loans, BMB provides credit for purchasing vehicles as well as setting up women-centric businesses, such as crèches, beauty salons and food catering businesses.

The bank’s base rate is 10% currently and most of its business loans are priced above 11.5%. Retail loan rates vary between 11.50% and 14.25%.

After the idea of a women-centric bank was announced by Chidambaram in the Union Budget of 2013-14, the government promptly set up a committee with various ex-bankers as members to draw up a blueprint of the bank. One of the members was Arundhati Bhattacharya, then head of SBI Capital Markets and now SBI chairman.

Done deal?

According to Bloomberg, the finance ministry floated a proposal to the Cabinet to combine BMB with SBI.

BMB was set up by the UPA govt in 2013 with an initial capital of R1,000 cr and to cater to women borrowers.

The unlisted BMB made a profit of R12.26 cr for the five months of 2013-14, mainly driven by treasury income.