SBI plans to merge all associate banks

Seeks Centre’s nod for move, unions oppose merger.

State Bank of India has restarted the process of merging its associate banks, including assets and liabilities and the Bhartiya Mahila Bank on Tuesday afternoon — a development if successful will create one of biggest banks in the world.

The total turnover the five associate banks is Rs 9.6 lakh crore whilst their total deposits is Rs 5,900 crore and advances Rs 3,97,000 crore.

SBI chairman Arundhati Bhattachraya said with the merger the balance sheet size will soar to Rs 37 lakh crore from Rs 28 lakh crore currently. “We would like do it as quickly as possible but there are processes involved including approval from stakeholders, central government and the RBI,” she said, adding that the cost of funds will also reduce.

SBI has five associate banks — State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

Stressing that this is “purely exploratory at this stage and not certain,” India’s largest lender said a proposal seeking an in-principle approval to start negotiations with associate banks will be submitted to the central government. A decision would be taken only after evaluating all the relevant considerations, it said.

The talk of merging the five associate banks has been going on for nearly a decade. However, it was put off after the crash of big US banks in 2008. There is a debate on whether banks are too big to fail. It has been picked up even in India.

However the government is keen to have at least two big banks that can be global players and also finance infrastructure projects. So discussion on merger of banks has been ongoing.

Workers unions of associate banks, however, have been opposing the merger. The 7,000 employees of the five associated banks of the State Bank of India, however, will go on a one-day strike on May 20 to protest against the takeover of associate banks by SBI.

Mr Devidas Tuljapu-rkar, central committee member of the All India Bank Employees Association said the five banks held their board meetings on Monday without any prior intimation even to the five workmen directors of the banks and despite their protest.

SBI also added: “there is no certainty in relation to our completing the acquisitions, but the bank, as a matter of good corporate governance to ensure complete transparency, are intimating this decision.”

India’s largest bank had merged with itself two other associate banks — namely the State Bank of Saurashtra and the State Bank of Indore in 2008 and 2010 respectively. All of these associate banks, with exception of State Bank of Travancore are headed by managing directors whilst Travancore is headed by a general manager who has been given additional charge.