After over five years of hiatus, associate banks of SBI including State Bank of Bikaner and Jaipur have proposed to merger with the parent lender.
Apparently under pressure from the government to assimilate six banks almost in one go, State Bank of India will bank on its experience of acquiring State Bank of Saurashtra (in 2008) and State Bank of Indore (in 2010) to push through the exercise.
India’s largest bank will face a Herculean task, integrating the five associate banks — State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of Hyderabad (SBH), State Bank of Bikaner and Jaipur (SBBJ), and State Bank of Travancore (SBT) — and the Bharatiya Mahila Bank (BMB) — in view of concerns among employees of these banks that they may get a raw deal.
**Key facts**
a. The merged entity will increase SBI’s market share from 17 per cent to 22.5-23 per cent the country with total business of over Rs. 35 lakh crore.
b. It will have one-fourth of the deposit and loan market in the country and SBI’s staff strength will increase by 35-49 per cent.
c. The merged entity will also increase branch network by 6,000. At present, SBI alone has more than 15,000 branches in the country.
The employees are worried that their promotion prospects may be hampered due to curtailment of seniority. Further, rationalisation of branches due to overlap may lead to their relocation.
All India State Bank of Patiala Employees Federation on 18th May 2016 held demonstrations in several parts of Punjab against the proposed merger of five associate banks with State Bank of India (SBI).
Addressing bank staffers in Ludhiana , Ashok Malhan, Vice President, All India State Bank of Patiala Employees Federation, said the employees would strongly oppose the proposal of the SBI to merge associate banks with itself.
A director of one of the associate banks (ABs), who attended his bank’s board meeting on May 17, said, “The manner in which the merger is being attempted, just bringing it in as a table item at the board meeting and without discussing what is in it for all the stakeholders, it is not the right thing to do.
The government recently set up the Bank Board Bureau (BBB) to look into the issues including consolidation in public sector banking space.
The BBB headed by former CAG Vinod Rai had conducted interview for appointments of Managing Directors of some of the banks where posts will be falling vacant during the current fiscal.
The Bureau was constituted to help the government select heads of public sector banks and financial institutions and assist banks in developing strategies with regard to capital—raising and consolidation.
Besides Chairman, the Bureau has three ex-officio members and an equal number of expert members.
Expert members are ICICI Bank’s former joint MD H N Sinor, Bank of Baroda’s former CMD Anil K Khandelwal and rating agency Crisil’s ex-chief Rupa Kudwa.
Its ex-officio members are Secretary, Department of Public Enterprises, Financial Services Secretary and RBI Deputy Governor.
Long-term benefits:
Brokerage firm Motilal Oswal, in a report said, long-term synergy benefits (of the merger) will outweigh near-term challenges. However, integration of over 70,000 employees (34 per cent of the parent’s workforce; size of business is 25 per cent of the parent’s) will be a key challenge. Cost savings on account of treasury operations, audit, and technology, among others, will lower the cost-to-income ratio in the long term.
PSU mergers:
When it comes to merging public sector undertakings, the Centre does not have a good track record. For example, the merger between Air India and Indian Airlines was not very smooth.
Interestingly, while the merged entity is yet to report a profit, the individual airlines made profits before their merger into one entity. In 2003-04, the then Indian Airlines was able to come out of the red and reported a net profit Rs. 44 crore.
The merger has not really led to the combined entity gaining market share either.
