The merger of State Bank of India (SBI) with five of its associates \u2014 State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Bikaner and Jaipur (SBBJ), State Bank of Patiala (SBP), State Bank of Travancore (SBT) \u2014 and Bharatiya Mahila Bank (BMB) will see the new entity entering the list of the world\u2019s top 50 banks in terms of assets. The merger will result in the consolidated entity commanding a deposit base of over Rs 21.5 lakh crore \u2014 just over a fifth of the total deposit base of the banking system, of Rs 97 lakh crore. On Wednesday, the Union Cabinet approved\u00a0 the merger. The main rationale for going ahead with the merger, in the words of SBI\u2019s management, are synergies and cost savings. \u201cThe merger of SBI and its associate banks is a win-win for both. While the network of SBI would stand to increase, its reach would multiply. One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base,\u201d Arundhati Bhattacharya, chairman, SBI, said after the cabinet approved the merger. According to CLSA, however, the integration challenges will be high. \u201cThese challenges largely emanate from large and unionised staff and some of the \u2018weaker\u2019 PSUs are \u2018large banks\u2019 in terms of size of branches, employees as well as balance sheets,\u201d it wrote in a recent note. The brokerage also believes that the merger has the potential to divert the management\u2019s attention from improving asset quality and increasing current account savings account (CASA) deposits to managing the merger. In FY16, SBI\u2019s gross non performing assets (GNPAs) rose over 73% to close to Rs 1 lakh crore. On similar lines, Jefferies India is of the opinion that the merger would lead to higher employee cost, which would consequently lower returns for shareholders. \u201cThe merger would entail higher employee costs given the difference in pension\/gratuity calculation between associate banks and SBI. The greater challenges are in employee redundancies, HR\/operations, branch and ATM rationalization, etc.,\u201d it noted in a report released after the SBI board approved the proposal for the merger. For customers, particularly that of the associates, however, the merger would enable them to access the better services of SBI, while also being able to enjoy a larger ATM and branch network. More importantly, it will give them access to loans at lower rates of interest. Currently, while the one-year marginal cost of funds based lending rate (MCLR) of State Bank of Travancore, for instance, is 9.85% as compared to 9.15% being offered by SBI. Although the merger ratios have not been announced yet, the news of the approval of the merger by the cabinet saw shares of each of the three listed subsidiaries \u2014 SBM, SBBJ and SBT \u2014 rise by the maximum permissible 20% on the stock exchanges. Analysts, however, are of the opinion that the merger might not be as positive for minority shareholders as the street is assuming it to be, particularly given the fact that SBI\u2019s management has made it clear that the merger ratios will be arrived at only after detailed exercises by valuers. \u201cGiven the asset quality and return ratios of the three listed subsidiaries vis-\u00e0-vis SBI, I don\u2019t expect the merger ratios to be much in favour of the former\u2019s shareholders. Moreover, given the existing shareholding patterns in them, minority shareholders can\u2019t stall the merger even if they are unhappy with the merger ratios,\u201d the banking analyst of a leading domestic brokerage said on the condition of anonymity. As of March 2016, SBI had a 90% stake in SBM, 79.09% stake in SBT, a 75.07% in SBBJ and 100% stake each in SBH and SBP. BMB, on the other hand, is wholly owned by the central government. SBI had merged two subsidiaries \u2014 State Bank of Saurashtra and State Bank of Indore \u2014 with itself in 2008 and in 2010, respectively.