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Last Updated : Aug 19, 2016 02:06 PM IST | Source: Moneycontrol.com

SBI approves merger with associates

The board of country's largest lender, State Bank of India, has approved the merger of its associate banks, along with Bhartiya Mahila Bank, with itself.

 
 
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The board of country's largest lender, State Bank of India, has approved the merger of its associate banks, along with Bhartiya Mahila Bank, with itself.

As per the approved merger ratios for each of the banks, the scheme provides for allotment of:

- 28 equity shares of Rs 1 each of SBI for every 10 equity shares of Rs 10 each of State Bank of Bikaner and Jaipur
- 22 equity shares of Rs 1 each of SBI for every 10 equity shares of Rs 10 each of State Bank of Mysore
- 22 equity shares of Rs 1 each of SBI for every 10 equity shares of Rs 10 each of State Bank of Travancore
- 4,42,31,510 equity shares of Rs 1 each of SBI for every 100 crore equity shares of Rs 10 each of Bhartiya Mahila Bank

The merger will add to the strength of SBI -- which, at assets of about Rs 23 lakh crore, is roughly one-fourth of the Indian banking system -- with an additional capital base of about Rs 4 lakh crore.

SBI CFO Anshula Kant told CNBC-TV18 that eight valuation experts were appointed to arrive at the share swap and that May 16, the day the merger was first announced, was taken as the valuation cut-off date.

The run-up in share prices since the announcement has made the merger ratios look optically good for some of the banks and not so much for others but given that the SBI anyway owns a majority in the subsidiaries, the financial impact will not be much.

Kant said the scale achieved from the merger would lead to significant cost and competition advantages over time. Post the merger, SBI will likely break into the the list of the world's top 50 banks by asset size, she added.

She further said that the associate banks -- whose asset quality is generally worse than that of their parents -- may see some NPA pain in the September quarter as SBI looks to clean up their balance sheets and bring them up to its own levels.





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First Published on Aug 18, 2016 04:52 pm
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