With the Union Cabinet granting approval to the merger
into the State Bank
of India (SBI) of its five associate banks, the public lender on Thursday said the combined entity would have lower management costs resulting in savings on operating costs.
is complete, we will be in a position to save costs of these associate banks, because the structure of the five head offices will fold into one corporate office of the SBI.
The zonal offices will also get integrated into our operations," SBI
Managing Director DK Khara told BTVi
in an interview.
"Lesser management costs of these offices will get reflected in saving operating costs of banks. CASA
(Current Account, Savings Account) will go up. Lots of cost efficiency and capital efficiency will come into play. It will save costs for banks, which will save resource cost and prove advantageous," Khara said.
He said that though there are no plans to shut down branches, rationalisation of branches would take place -- meaning dedicated branches for small and medium entreprise (SME) lending, servicing high net worth individuals (HNIs), among others.
"It will create much more value for customers," he added.
The merged entity with the one-fourth of the market share would have a balance sheet of about Rs 40 lakh crore, 23,000 physical branches and 22,000 ATMs, Khara said.
Post-merger, a shareholder will get 28 shares of SBI
for every 10 shares of State Bank
of Bikaner and Jaipur (SBBJ).
The legal entity of the associate banks
will cease to exist from the effective date of merger.
"From the effective date, the merger
will come into effect. The data integration will start soon after that and in a month, we should be able to complete all the data integration," he said.
MD said that the losses posted by the associate banks
was transitory and a result of realigning of their asset classes with the SBI.
"The loss concerned in associate banks
is more transitory in nature. It essentially happened when we tried to realign the asset classes of all associate banks
with the SBI.
have significant operating profits... That's not much of an issue," he said.
"It was transitory two-quarter loss, because prior to that they never had such kind of losses. Once asset re-classification is complete, they will be back to normal," he added.
The Cabinet on Wednesday approved the merger
of its five subsidiaries, namely, State Bank
of Bikaner & Jaipur, State Bank
of Hyderabad, State Bank
of Travancore, State Bank
of Mysore and State Bank
The proposed merger
of the Bhartiya Mahila Bank
into the SBI
is still under consideration.
Last year, the SBI
had announced that it would merge its five subsidiaries and the Bharatiya Mahila Bank
on getting government approval for the same.