SBI to merge 5 subsidiaries, Bharatiya Mahila Bank with itself
The proposed consolidation will create a banking behemoth with a balance sheet size of 37 trillion rupees.
The SBI on 17 May 2016 informed the Bombay Stock Exchange (BSE) that it is seeking in-principle sanction of the Union Government to enter into negotiation with its 5 subsidiaries and Bharatiya Mahila Bank for acquisition.
Beside, the boards of State Bank of India (SBI) and the subsidiary banks met individually in Mumbai and decided to begin merger talks with the parent.
As per the developments, India’s largest lender is planning to acquire the businesses including assets and liabilities of the following 5 subsidiary banks and the Bharatiya Mahila Bank –
1. State Bank of Bikaner and Jaipur
2. State Bank of Hyderabad
3. State Bank of Mysore
4. State Bank of Patiala
5. State Bank of Travancore
All the above six banks are Public Sector Banks (PSBs) and among these, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed.
SBI first merged associate State Bank of Saurashtra with itself in 2008. Two years later, in 2010, State Bank of Indore was merged.
Outcomes of the merger
Though there are apprehensions that the proposed consolidation will result in job losses, the following positive outcomes are expected from the merger.
• It will resolve the non performing assets (NPAs) issue to a large extent. As per an estimate, publicly traded banks in India added nearly 1 trillion rupees in bad loans between October and December 2015.
• The new entity will help in leveraging the synergies among the banks. As a result, it will pave the way for lot of cost benefits and expansion of financial services to remote areas.
• It would create a banking behemoth with a balance sheet size of 37 trillion rupees. Its size would be more than 5 times the 7.2 trillion rupees worth ICICI Bank Ltd., which is India’s second largest lender.
• In terms of assets, the combined entity will help India to figure in the top 50 largest banks in the world. In 2015, SBI was at the 52nd place in the world in terms of assets. Post-merger, it will be figured at the 45th position.
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