Top state-run lender SBI today proposed merger of its five associate banks and newly created Bharatiya Mahila Bank (BMB) with itself and sought government's approval for the same, triggering consolidation in the public sector banking space.
SBI is seeking "in principle sanction" of the Central Government to enter into negotiation with the subsidiary banks (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore) and Bharatiya Mahila Bank Limited to acquire their businesses, including assets and liabilities, a statement said.
"While the decision is purely exploratory at this stage and there is no certainty in relation to our completing the acquisitions, the Bank, as a matter of good corporate governance to ensure complete transparency, are intimating this decision," it said.
No decision has been taken at this stage approving one or more of the aforesaid acquisitions and the same will be taken by the bank's board upon evaluating all the relevant considerations, it added.
Earlier in the day, respective boards of five associate
banks proposed merger with the parent State Bank of India (SBI) in meetings held today.
The country's largest lender has five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
Among these, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed.
In a statement, State Bank of Bikaner and Jaipur said that in-principle approval of the Board accorded to enter into negotiation with SBI for acquisition of its business.
The other two listed associate State Bank of Mysore and State Bank of Travancore also issued similar statements.
Commenting on the proposal, SBI Chairperson Arundhati Bhattachraya said with the merger the balancesheet size will soar to Rs 37 lakh crore from Rs 28 lakh crore currently.
"We would like do it as quickly as possible but there are processes involved including approval from stakeholders, central government and the RBI," she said.
She further said that it will help in reduction of cost of fund.
Meanwhile, a section of employee unions have registered protest against any such move and threatened to go on a strike if such a move is approved by the SBI and the government.
All employees of Associate Banks will go on strike on May 20, All India Bank Employees Association (AIBEA) General Secretary C H Venkatachalam said.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.
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 yesterday conducted interview for appointments of Managing Directors of some of the banks where posts will be falling vacant during the current fiscal.
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The newest public sector bank, Bhartiya Mahila Bank (BMB) received the banking licence from Reserve Bank of India on September 25, 2013.
The bank with 100 branches focuses on the entire pyramid of Indian women, special attention is given to economically neglected, deprived, discriminated, underbanked, unbanked, rural and urban women to ensure inclusive and sustainable growth.
According to finance ministry officials, merger of BMB and SBI will happen within this fiscal.
SBI is expected to initiate the merger process with associate banks as early as possible and hopefully SBI will merge at least two associate banks with in this fiscal, they said.
Shares of SBI closed at Rs 177.05 per unit, down 0.08 per cent. State Bank of Mysore shares soared 12.76 per cent to Rs 426.70, and that of State Bank of Travancore rallied 9.87 per cent to Rs 399.10 on BSE.
State Bank of Bikaner and Jaipur too rose by 4.22 per cent to Rs 508.95.
For the fourth quarter ended March 2016, State Bank of Bikaner & Jaipur reported 31 per cent decline in net profit at Rs 193.22 crore as against Rs 280.25 crore in the same quarter a year ago.
State Bank of Mysore also reported a fall of 23 per cent in net profit at Rs 104.86 crore as compared Rs 135.97 crore in the same period a year ago.
Other associate, State Bank of Travancore reported a 67.6 per cent decline in its net profit to Rs 62 crore versus Rs 192.9 crore in the same quarter a year ago.
