Cabinet clears merger of SBI, associate banks

The Cabinet today gave go-ahead to the merger of State Bank of India (SBI) and its associate lenders that would make the state-owned lender a global-sized bank.
India's largest lender SBI had last month mooted the proposal for merger of its five subsidiary banks with itself and acquisition of the newly set up Bharatiya Mahila Bank.
SBI has five associate lenders -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
"Kindly await a structured briefing on that," Telecom Minister Ravi Shankar Prasad said when asked if the Cabinet approved the merger of associate banks with the SBI.

Meanwhile, SBI Chairperson Arundhati Bhattacharya said merger of SBI and its associate banks is a win-win for both the sides.
"Currently, no Indian bank features in the top 50 banks of the world. With this merger, some visibility at global level is likely to increase. Customers of associates and subsidiaries of the Bank will also be beneficiaries," she said.

She further said that with this merger the network of SBI will increase and its reach multiply. One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base, Bhattacharya said.

"Customers of associates and subsidiaries of the Bank will also be beneficiaries. Any introduction of new technology by SBI would simultaneously be available uniformly. The scale of operations and common cost would get rationalised. Overall, the synergies being pooled at one place are going to be a big positive," she added.
Among the associate banks, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed. There shares jumped nearly 20 per cent on benchmark BSE today and hit their respective upper circuit limits towards closing of the trading session. SBI stock was up 3.9 per cent.

The merged entity will become a banking behemoth, which could compete with the largest in the world, with an asset base of Rs 37 trillion (Rs 37 lakh crore) or over USD 555 billion, with 22,500 branches and 58,000 ATMs. It will have over 50 crore customers.
Presently SBI has close to 16,500 branches, including 191 foreign offices spread across 36 countries.
On the proposal to merge Bharatiya Mahila Bank with SBI,
Jaitley said, "It is under consideration as of now. We have not taken any decision related with that today."
About the specific date on which the merger of five associate banks with the SBI would become effective, the he said, "We will inform you about the specified date when the merger will come to the effect."

Jaitley also said that merger will not be detrimental to the services of any employee, "It will be a smooth arrangement."
The board of SBI earlier approved the merge plan under which SBBJ shareholders will get 28 shares of SBI (Rs 1 each) for every 10 shares (Rs 10 each) held. Similarly, SBM and SBT shareholders will get 22 shares of SBI for every 10 shares.
SBI had approved separate schemes of acquisition of State Bank of Patiala and State Bank of Hyderabad. There will not be any share swap or cash outgo as they are wholly-owned by the SBI.

SBI stock closed 0.68 per cent down at Rs 268.65 on BSE.
Of the three listed subsidiary banks among the five: State Bank of Mysore stock closed 0.47 per cent down at Rs 561.65 apiece; State Bank of Bikaner and Jaipur down 0.51 per cent at Rs 718 and the share of State Bank of Travancore fell 0.91 per cent down at Rs 559.95.