Sbi Panel To Achieve Associates Synergy

The State Bank of India is forming a steering committee to work out modalities for achieving synergies among its seven associate banks and also provide them a sharp regional focus. The steering committee will consist of representatives of all the associate banks.

SBI had decided in December last year to completely overhaul the associate banks, taking into account the fact that though they act as national banks, the capacity to compete strongly on a national level is missing in them.

The committee will look into the pros and cons of providing the banks with a regional focus. It will also look at the workability of the whole scheme and the changes needed in the systems and procedures of the associate banks.

 

Sources point out that the steering committee will also identify the niche areas associate banks can cater to without competing with the parent -- State Bank of India. Currently all the seven associates -- State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala, State Bank of Saurashtra and State Bank of Travancore -- operate like national banks and often compete with each other and the parent.

It has been generally decided that the associate banks will concentrate on mid-corporates. There are plans for a transfer of expertise between the associate banks to leverage on specialisation. The venture aims at changing the focus of the regional banks to achieve synergies without an actual merger of the subsidiaries. The merger will enable SBI to maintain a globally competitive size.

The Mckinsey report had recommended a phased merger of the associate banks with the SBI. But it was eventually decided that the banks' focus would have to be altered before the actual merger.

The proposal envisioned that the associates focus on their respective regions and any expansions should be confined to their geographical areas, which may also extend beyond the states they are based in. In the case of State Bank of Patiala, it can do business in Haryana and Delhi apart from Punjab. Under the proposal, the associates will be the lead bank of a mid-corporate instead of being a small member of a consortium handling a large account. It was felt that the associate should have at least a 30 to 35 per cent share of the consortium.

It was also recommended that the associate banks form a syndicate for fairly large exposures.

In case of large exposures, the local associate bank will be leader of the consortium and the other would bring in the balance funds. The steering committee is to work out the further modalities of this proposal.