Merger issue not on SBI board agenda

The State Bank of India (SBI), the country's largest bank, has dropped plans to take up the issue of merging the associate banks with itself at its central board meeting tomorrow. The bank would first hold negotiations with unions, which have expressed their opposition to the consolidation move.

"The board (of SBI) will not discuss the matter (consolidation) at (tomorrow's) meeting," SBI chairman, O P Bhatt, told reporters on the sidelines of a function organised by the Indian Merchant's Chamber.

The board of SBI was scheduled to consider the mergers tomorrow and the six associate banks were to take up the matter in separate board meetings on January 25.

The six associate banks are State Bank of Hyderabad, State Bank of Indore, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Bikaner & Jaipur.

The merger of State Bank of Saurashtra (SBS) with SBI was approved by boards of both the banks in August last year. SBS is 100 per cent owned by SBI. SBI is waiting for a nod from the government to give effect to the merger.

Bhatt said SBI will continue its consultation with unions on the issue of consolidation. The process of consolidation is "reconstruction" within the group as SBI is a predominant or 100 per owner of the associate banks.

SBI is keen on merging the associate banks with itself to gain size and market share, which has slipped slightly of late. The talks on January 22 remained inconclusive, but the two sides have agreed to meet again.

The unions are opposed to the merger, claiming that it would hurt the sentiments of employees and expansion of the bank within the country. The United Forum of Bank Unions, an industry platform of bank employees, has called for a strike on January 25 to protest against consolidation in the PSU banking sector and on February 25 and 26 to intensify their stir.

Referring to the 75 basis point cut in the overnight rate by the US Federal Reserve, the SBI chairman said it does not mean that there will be automatic cut in India.

The interest rates in the country are not expected to rise. In case Reserve Bank of India maintains the status quo on rate front in the third quarter review, it will be a signal that further rate hike is arrested, Bhatt said.

The recession in US will not have an adverse impact on the growth of India economy. The growth in India is driven predominantly by domestic demand. Infact, the US companies are likely to outsource some of their work (to cut costs and stay afloat) to India, he added.