Moneycontrol
Feb 17, 2017 08:26 AM IST | Source: Moneycontrol.com

Govt paves way for SBI, associates merger but challenges remain

State Bank of India, country‘s biggest bank is set to become even bigger, with the Cabinet approving its merger with its five subsidiaries on Wednesday.

Govt paves way for SBI, associates merger but challenges remain
Moneycontrol Bureau

State Bank of India, country’s biggest bank is set to become even bigger, with the Cabinet approving its merger with its five subsidiaries on Wednesday.

The effective merger of SBI with its five associate banks — State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT) – is likely to be completed only in the next financial year.

After the government notification on the effective date of merger is communicated with SBI, it will kickstart the merger process with respect to data integration, streamlining its IT (information technology) platform, rationalize 20 percent of its branches, integrate its five treasury operations into one and getting the employees on the SBI payscale among other things.

SBI had cleared the proposal for the merger last May. In June, the Cabinet approved the merger in principle. The proposal then went to the respective bank boards before returning to the Cabinet for a final approval, which was announced by Finance Minister Arun Jaitley on Wednesday evening.
The merger will create a large bank with an asset size of about Rs 32 lakh crore.

No decision, however, has been taken on merging Bharatiya Mahila Bank, which was a part of the proposed merger.

Earlier, SBI Chairman Arundhati Bhattacharya had said the merger could be deferred by a quarter beyond March due to demonetisation. “Doing things in the last quarter is not wise. There will be a lot of information technology changes and normally by mid-February, we freeze all system changes. We do not want to take any risks at annual closing time,” she said.

Since the merger proposal, rationalisation of branches and the cost structure in terms of HR have been highlighted as its key challenges.

There is difference in the way wages are structured at SBI and the subsidiary banks. The SBI management will have to have a dialogue with the subsidiary banks’ employees and many of them will get a huge lump-sum take home right now, while some may have the option to take it in future.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it, which the bank says was done smoothly.

On the proposal to merge the Bharatiya Mahila Bank with the SBI, Jaitley said, “It is under consideration as of now. We have not taken any decision related with that today.”
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