The State Bank of India revived the two decade old idea of merging its associate banks with itself that would push up its global raking by four notches and give it a pole position to fund an economy that is poised for a lift-off as governmental and regulatory actions of two years revive animal spirits.
Shares in associate banks surged on hopes that time may be ripe for the merger to happen with the Narendra Modi government committing itself to the consolidation of banks when finance minister Arun Jaitley declared the intention in his Budget speech in February.
“We feel that at this point of time it's the right thing to do since there it's the right thing to do since there is a slight uptake in the economy and we feel that we need to be prepared,“ said Arundhati Bhattacharya, chairman, SBI.“There is a lot of duplication that is there right now. We have six treasuries and all the processes are duplicated. So rationalisation of all these will help us save cost.'' The merger will lift SBI's global ranking to 55, from 59. McKinsey, a consultant, recommended in 1995 that all associates be merged with SBI, or merge themselves into one separate entity .
The country's biggest bank will also consider taking in its fold the Bharatiya Mahila Bank, a product of the Manmohan Singh government for specialised lending to women entrepreneurs.
Banks consolidation has been a topic of discussion for nearly two decades with the state-run lenders having nearly 70% of market share and involved in similar line of businesses. There is also a concentration of more banks in same localities when they could have spread their branch network in different regions. The merger of Bharatiya Mahila Bank and SBI will happen within this fiscal, said a bureaucrat.
While the managements and government may have decided to move ahead with mergers, but the first obstruction has already emerged with the associate banks' 45,000 staff planning to strike work on May 20. SBI and its associate banks have one-fourth of market share in terms of advances and deposits.
Post-merger, the State Bank of India would have deposits of over Rs.21 lakh crore crore and advances of Rs.17.5 lakh crore.