Concerns plague SBI arms ahead of merger

By: |
New Delhi | Published: February 17, 2017 6:30:22 AM

Will the five associate banks of State Bank of India (SBI) lose loyal customers who swear by their regional identities once these get merged into the nation’s largest lender?

sbi-reuState Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala will be merged into SBI, finance minister Arun Jaitley said on Wednesday after the Cabinet meeting. (Reuters)

Will the five associate banks of State Bank of India (SBI) lose loyal customers who swear by their regional identities once these get merged into the nation’s largest lender? Will their employees be treated as second-rate staff by the SBI’s current workforce merely because they have been working with the subsidiaries much smaller in size and standing? These are some of the concerns that the government must see addressed for a seamless integration following the Cabinet approval for the merger, according to officials with at least two subsidiaries.

State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala will be merged into SBI, finance minister Arun Jaitley said on Wednesday after the Cabinet meeting. A time frame for the amalgamation is yet to be announced, but it is expected to miss the SBI’s earlier deadline of March 2017, mainly due to demonetisation.

“It’s not just about balance sheets or job security. Concerns such as how they (SBI) manage to preserve the concept of banks as regional symbols in the new scheme of things and how employees of these small, associate banks will be treated in future by the SBI staff need to be addressed,” an official with one of the associate banks of SBI told FE. “People are not opposing the merger, but if their concerns are addressed, it will help improve operational efficiency,” he added.

An official with another listed subsidiary bank echoed the sentiments. He said there is a perceptible unease among sections of employees, mainly at the middle level, who fear they might be treated like second-rate SBI employees (by the existing staff of SBI) once the merger is complete.

Also, any threat to the cultural ethos and regional identity of these banks that have long been associated with respective regions may be counter-productive, they added. For instance, some customers hold accounts in, say, a Bank of Mysore solely because they think it represents their region in the banking space.

“Care must be taken, maybe through a proper advertising campaign, to tell such regionally-loyal customers that their banks still represent their respective regions and are now catering for national, global aspirations,” said one of the officials.

The merger, aimed at creating a public-sector behemoth, is likely to result in recurring savings of more than R1,000 crore in the first year through a combination of enhanced operational efficiency and reduced cost of funds, according to an official statement. Already, responding to the news of the merger, shares of the three listed subsidiaries — State Bank of Mysore, State Bank of Travancore and State Bank of Bikaner and Jaipur — rose 4.66%, 4.21% and 3.48%, respectively, on the BSE on Thursday. State Bank of India share price didn’t jump as much, but still outperformed the Sensex with a 0.65% rise on Thursday.

Following the merger, the government believes, existing customers of subsidiary banks will benefit from access to SBI’s global network. The merger will also lead to “better management of high-value credit exposures through focused monitoring and control over cash flows” instead of the current practice of separate monitoring by six different banks.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.