SBI mulls merging one of its associate banks this year

State Bank of India is contemplating merging one of its five associate lenders with itself this year as the parent bank's capital base expands, Chairman Pratip Chaudhuri said today.

Additionally, the country's largest lender will seek a go-ahead for raising capital from an institutional placement of shares, he said, adding such a move will also help expand the capital base necessary for a merger.

"We will definitely think of a merger this year. As the capital base expands, we will definitely think. This year I think, the capital position should be comfortable," he told reporters at the bank's corporate headquarters here.

Asked which of the five -- State Banks of Bikaner and Jaipur, Hyderabad, Mysore, Patiala and Travancore -- will be merged first, Chaudhuri chose not to point at any particular name. "As far as we are concerned, all five are on the table."

The Government has repeatedly emphasised the need for having a larger Indian bank. According to some analysts, merger of all the five associates can catapult SBI into league of the ten biggest banks in the world.

However, bank employees are opposed to mergers as was in case of State Bank of Indore and State Bank of Saurashtra, which were subsequently merged with the parent.

Chaudhuri said SBI will need additional capital if the mergers were to happen and will explore all routes, including a qualified institutional placement (QIP), for this.

"For QIP, we will have to talk to the Government. We think it is theoretically possible. Government stake (in SBI) is 63%, and even if it goes down to 58%, there should not be a problem," he said, adding it can raise up to Rs 10,000 to Rs 14,000 crore through this route.

Chaudhuri added the bank had not discussed with the Government on any such capital raising move. He said the other two routes of capital raising -- internal accruals (around Rs 15,000 crore) and Government infusion (Rs 3,000 crore) are the more certain ones, while the QIP is the "variable" one.

SBI received around Rs 3,000 crore infusion from the Government last fiscal through the preferential allotment route. Its core tier-I capital stood at 8.66% as of December 2012.