Virtual merger of SBI arms on, M&A later: Purwar

A K Purwar, chairman of State Bank of India, today ruled out physical merger of associate banks with itelf in the near future, but said "virtual merger" of the entities was on.

"Consolidation is the need of the hour as a number of banks are not able to invest in technology upgradation, business process and new products. Virtual merger is going on in the form of technology and treasury integration, but legal merger will take a long time," Purwar said.

SBI, apart from its own network of 10,000 branches, has seven associates - State Bank of Patiala, State Bank of Indore, State Bank of Kikaner and Jaipur, State Bank of Saurashtra, State Bank of Mysore, State Bank of Hyderabad and State Bank of Travancore.

Although the associate banks offers virtually the same products as SBI, they operate as separate physical entities. However, their technology platform and treasury operations have been integrated with SBI.

Referring to SBI's chain of 5,000 ATMs in the country, Purwar said that with the establishment of the ATM regime, the major advantage to the banks was that the deposit composition has started undergoing a change. "It is more beneficial to low cost depositors. People are keeping lot of money in saving and current accounts so that they can transact at anytime," he added.

On the proposed cash withdrawal tax, Purwar indicated that it will encourage people to transact more in cheques rather than cash, which, in turn, will discourage black money proliferation in the country.

"This will encourage companies withdrawing lakhs of rupees to pay salaries to workers to issue a salary cheque to be credited into the employees account. In fact, it is one way of monetising everything," he said.

Referring to competition from private banks, Purwar said these banks have helped nationalised banks improve their services and efficiency "substantially."