Cabinet Approves Merger Five Associate Banks With SBI

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New Delhi: The Union Cabinet on Wednesday gave an in-principle approval to a proposal for the merger of five associate banks with State Bank of India (SBI). But the proposal may come up for final clearance again as some legal issues need to be worked out.

SBI has 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. “The country needs stronger banks rather than a large number of lenders,” Finance Minister Arun Jaitley had said at the second edition of the Gyan Sangam meet held in March.

Last month, SBI’s board had submitted a proposal to the government for merging five associate banks. “The idea to merge the five banks at the same time makes sense as they are on the same technology platform which the SBI has. That makes the task easy,” a finance ministry source said.

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The merger will create a behemoth with an asset base of Rs 37 lakh crore, with 22,500 branches and nearly 60,000 ATMs. SBI alone has 16,500 branches including 199 offices in 36 countries.

SBI had first merged State Bank of Saurashtra in 2008 and State Bank of Indore in 2010.  SBI had some time ago had set up a crack team to prepare for amalgamation of associate banks. A SBI source said that if all goes well, the move can be completed within four to five months.

Recently, Finance Minister Arun Jaitley had said that the centre is evaluating the merger proposal and will bring the move to the Cabinet soon “as the government supports consolidation, and this was part of my Budget speech”.  Mr Jaitley held a meeting with heads of public sector banks and financial institutions last week.  The move is facing dissent from employees unions of banks. They had called for a strike on June 28 and 29 to protest against the move.

The merger move is likely to meet political opposition as Left parties control the bank associations. Communist Party of India (CPI) general secretary S Sudhakar Reddy had announced recently that the Telangana assembly would pass a resolution opposing the amalgamation.

The Left Democratic Front (LDF) Kerala government too is under pressure because State Bank of Travancore is part of the merger exercise.