SBI plans 5 associate banks merger in 12-18 months

Country's largest lender State Bank of India (SBI) plans consolidation of remaining 5 associate banks with itself in the next 12-18 months.

"... The bank (SBI) envisages consolidation of all subsidiary banks with SBI within a period of 12 to 18 months," Finance Ministry informed the Standing Committee on Finance.

This was in response to a query on the stance of the government on merging the subsidiaries with SBI raised by the Parliamentary panel headed by former Finance Minister Yashwant Sinha.

In the submission to the panel, SBI Chairman O P Bhatt said "There are 5 banks remaining. We have representations from various associations, leaders etc from these 5 banks which want these banks also to be merged with the State Bank of India simply because it is primarily good for the employees in multiple ways".

In the last 2 years, SBI merged two associates namely State Bank of Saurashtra and State Bank of Indore. State Bank of Saurashtra amalgamation took place in August 2008 while State Bank of Indore merged with the parent last year.

Following the merger, SBI will be left with five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.

Among these, the State Banks of Bikaner and Jaipur, Mysore and Travancore are listed companies.

Further elaborating on the merger, the Ministry said, preparations towards consolidation of the banking subsidiaries within the State Bank Group has been systematically planned.

This is to be done through bringing all associates banks and SBI under the same state-of-art core banking technology platform. All the associate banks also have products, services and process broadly similar to that of SBI.

The consolidation is seen as the next logical step so as to bring in economies of scale, reduce administrative overheads, re-deploy and channelise trained manpower to business development, the ministry told the panel.

It said in this process, it will also reduce avoidable competition from different arms of the same group engaged in the same activity in the same segments and geography.

"The consolidation is aimed at making the State Bank Group a stronger and more resilient organisation," the Ministry said.

Meanwhile, Bhatt told reporters in Mumbai today that both the mergers which have been done till now -- State Bank of Indore and State Bank of Saurashtra -- have been undertaken with prior permission.

He said it was done on a case-to-case basis from all the concerned bodies like the respective Boards, the Government and the RBI.

"We have not sought any blanket permission for the mergers," Bhatt said in reply to a question.

On SBI's bond issue, he said that the bank has received subscriptions of around Rs 6,000-crore for its Rs 2,000-crore retail tax saving bond issue (with the green-shoe option).

The bank chairman said he expects total subscriptions to touch Rs 10,000-crore by February 28 when the issue closes.

Bhatt said he "regrets" that a majority of investors are unable to access the issue as the branches selling the issue need to have demat facility.

"We have decided to come out with one such issue every quarter. We will increase the branches from next quarter onwards," he said.

Meanwhile, Bhatt, who also heads the industry body Indian Banks Association, came out in strong support of liberalising the entry of foreign banks into the country.

He said this will make the market more competitive which in turn would strengthen Indian banks and the processes they follow.

The Reserve Bank had invited suggestions on the issue recently and is expected to come out with some possible guidelines soon based on the representations it had received.