The largest merger in the history of Indian Banking has been approved per a Cabinet decision on 15th February, which will make the State Bank of India list in the top 50 banks globally.
5 subsidiaries of the State Bank, viz. State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Mysore will now be merged with the State Bank of India, as per Arun Jaitley, FM. Previously, State Bank of Saurashtra (2008) and State Bank of Indore (2010) were merged with State Bank of India.
In a statement given by the Managing Director of SBI, Dinesh Khara to MoneyControl, their team expects the data integration process to be completed in a month, subsequent to the government notification of the merger, which will announce the date of the merger. He said that subsequent to the data integration, the biggest challenge will be in the stabilization of operations .
“This merger is an important step towards strengthening the banking sector through consolidation of Public Sector Banks. A formal notification in this regard is awaited from Government of India wherein the effective date of merger will be indicated,” SBI said in a statement.
Once merged, the enormous banking entity will have an asset base of around Rs 40 Lakh Crore, with 1/4th of the market share in the country’s banking sector as far as Advances and Deposits are concerned. The Balance Sheet size will be 5 times that of India’s biggest private lender, ICICI and one-fifth of the country’s GDP.
Arundhati Bhattacharya, SBI Chief said, “We are quite ready and as soon as the government notifies the final order, we will be ready to kick it off. We were planning to do it by March but again because of demonetisation it will probably mean a deferment of a quarter.”
According to the merger scheme proposed by SBI in August last year, a shareholder will get 28 shares of SBI for every 10 shares in SBBJ and 22 shares of SBI for every 10 shares held in SBM/SBT.The remaining two subsidiaries are not listed.
Khara also said that he cost of funds to the merged entity will reduce by 0.30 percent (30 basis points) and the cost to income ratio will reflect a reduction of 1% which is 100 basis points. This will effectively reflect in a savings of Rs 1,000 Crore in the first year of the merger operations, with the maximum effect being produced through operational efficiency as well as reduction in the cost of funds.
Mahesh Mishra, General Secy of All India SBBJ Coordination Committee said that since there will be centralised control of the SBI Mumbai office over local deposits, this might impact development activities at state level. He also indicated that there could be possible lay-offs after the merger.
The SBI Chief, Arundhati Bhattacharya, however had stated previously that this merger will in no way create a necessity of lay-offs. The employees of the associate banks will get letter of employment from SBI, taking the total staff of SBI up from 2,00,000 to approximately 2.7 Lakh across the country.
At present, SBI has about 18,000 branches, including 200 foreign offices spread across 36 countries, and about 62,900 ATMs.