New Delhi: State Bank of India (SBI), the country’s largest lender, has kick-started the process of merging its five associate banks with itself at one go. The merger is expected to be completed by the end of the current financial year.
The SBI board, which met on Tuesday, discussed the issue, and also explored the possibility to merge Bharatiya Mahila Bank.
“A proposal seeking an ‘in principle’ approval to start negotiations with associate banks will be submitted to the Central government, she said.
Asked for a time frame for the merger, she said, “We will try to do it as quickly as possible, within the current financial year definitely.”
Market share will go up
She said the bank will try to merge all the entities together, “not on the same day but in close order.” As all the associates are on the same technology platform, integration of the systems will not be an issue.
The merged entity will have one-fourth of the deposit and loan market, as SBI’s market share will increase from 17 per cent to 22.5-23 per cent, while the total business of the merged entity will be over Rs. 35 lakh crore. SBI’s staff strength will increase by 35-49 per cent while branch network will increase by 6,000. At present, SBI alone has more than 15,000 branches in the country.
The merger move comes after the government announced a road map for bank consolidation during the budget. This was required to build size, seen as necessary to fund the huge infrastructure financing needs of the country. No bank in India features in the top 50 banks of the world in terms of size.
The SBI will have to create and expand its present structure to ensure smooth operations of the merged entity.
“The SBI has to create a post-merger structure. Controlling the branches will be crucial,” said Pratip Chaudhuri, who was the SBI chairman between 2011 and 2013 and merged one of its associates, State Bank of Saurashtra. “In Andhra Pradesh there are 1,200 branches of State Bank of Hyderabad while SBI has about 1000. The merged entity will have over 2000 branches. So, they may have to create one more circle,” Mr. Chaudhuri said.