Associates' merger to improve efficiency, aid financially: SBI

Bhattacharya said the balance sheet size post merger will soar to Rs 37 lakh crore from 28 lakh crore currently and SBI will get fixed assets worth over Rs 4,000 crore from the books of the associates. Cost of funds is expected to come down sharply, maybe around 100 basis points, within a year, she said as the associates currently have high deposit rates.

SBI would like to get the process completed quickly but there is a string of approvals needed and swap ratio to be worked out before getting final approvals from stakeholders, the Reserve Bank of India and then the Central government, she said.Below is the transcript of Arundhati Bhattacharya's interview with CNBC-TV18's Latha Venkatesh.Q: What is the latest? We understand that you are going to be taking over Bharatiya Mahila Bank as well and the State Bank of India\\'s subsidiaries?A: We have just applied to the government which we are required to do under Section 35.1 of the SBI Act for in principle approval for starting these negotiation talks for the merger. So, that is what is being thought for now. Obviously the intention is that we will merge these banks.Q: We have separately got from some government sources that you will be taking over Bharatiya Mahila Bank as well, is that also something that was discussed in the board?A: Yes that was discussed.Q: So, now that is a done deal if the government wants you to?A: If the government gives us approval yes.Q: That means Rs 1000 crore more of capital coming into the bank from the Bharatiya Mahila Bank?A: That\\'s right.Q: With respect to the subsidiaries, what is the cost benefit analysis?A: While the cost on the side of the subsidiaries will only be in respect of superannuation benefits as you yourself was speaking about a little while back. In respect of the benefits, the benefits will be very huge because if you take into account the huge amount of overlaps that we have, today for instance there are six treasuries running, so that will get reduced to one treasury.In respect of yearly closing which we are going through right now, there are six sets of closings, six sets of inspections and audits, six annual general meetings, so there is six of everything. Now all of that gets reduced to one.Not only that in respect of branches etc that rationalisation of the branches can actually take place so that the same licences can now be used in a much better manner and we don\\'t have branches jostling next to one another. So, there can be huge efficiencies that we can get out of this.Considering the fact that we will be a much greater and a much bigger bank, that itself will also have quite a bit of advantage.Q: What will be balance sheet size?A: Balance sheet size will be around Rs 37 lakh crore around USD 550 billion.Q: From what Rs 37 lakh crore? What is it currently?A: It is around Rs 28 lakh crore.Q: Will this kind of a rationalisation, while you very clearly point out that there are going to be advantages in terms of avoiding duplication, will there be a problem in terms of adjusting staff cadres? Therefore some bit of resistance?A: No I don\\'t really think so. Today for instance if you take the entire group, around 13000 people are attriting on a yearly basis. So, that being the case this kind of whatever little overlap there might be for a little while this will get resolved within the next 12-18 months.Q: Have you all thought out in terms of numbers what will be the savings, what will be the improvement in cost to income, any ballpark numbers? Does the cost to income improve by say 10 percent, by 5 percent, anything that the markets can advantage of to value?A: We believe that within say a very short period of time, within a year, we should see the costs coming down by 100 basis points mainly because the deposits with the associate banks are taken at a higher rate. So, the cost of funds itself should come down quite sharply and that should come down within the period of a year. So, there itself we will have quite a bit of benefit. Over and above that we will have the benefit of all of these synergies that will get worked in.Also the associate banks have fixed assets to the extent of around Rs 4000 crore which will also come in and add to the capital and that we will be able to get on account of this. So, overall it is a very good move. It will consolidate the entire group. It will make it more efficient. Overall I think it is something that will definitely be of huge value.Q: What is the next process. I am sure the government will be more than willing because consolidation is something the government also has been talking about. So, how long, do we wait for six months, three months, one year?A: We would like to do it as quickly as possible. However there are several steps. Once the government gives the in principle approval, we have to work out the scheme of merger and that will mean obviously negotiation with the employees and the officers of those banks. Also we will have to work out the swap ratios. For that there has to be two valuers and then a third valuer who will certify the process. So, that will all have to be done and this will have to be accepted by various stakeholders. Then it will have to also be passed by Reserve Bank of India and then finally by the central government. After that only the merger can take place.Having said that, we would like to do this process quickly. If this process lingers then there is a lot of uncertainty all around. So, if we get the approval we would like to move on this very quickly.Q: So, we should expect it in a quarter you think?A: Quarter would be very small period of time.Q: How much does the bill go up by - the wage bill - The superannuation wage bill? A: Not too much. Superannuation will be only about Rs 23 crore per month which is really nothing much.