Two board members (shareholder directors) of the State Bank of Travancore (SBT) have raised strong objections to the manner in which the State Bank of India (SBI) was trying to acquire the State’s leading listed bank.
Addressing the media, Sajan Peter, Director and Chairman Audit Committee of the Board, and M. C. Jacob, Director SBT said that the procedure for the acquisition of SBT, has been vitiated ab-initio and due procedures and laid down norms have not been followed. They maintained that an independent review of the procedures followed would prove their contentions.
Narrating the merger plans of the SBI, the Directors said that on May 17, 2016, a meeting of the Board of Directors of SBT was urgently convened in Mumbai and a two-and-a-half page memorandum was brought in as a “table item” recommending approval of the Board for SBT to “enter into negotiations” with SBI for acquisition of business, including the assets and liabilities of SBT.
In the objectives of this memorandum, it was stated that the acquisition would be beneficial to customers, employees and other stakeholders of the bank. However, they said, there was no analysis/data/details of the pros and cons of the recommendation.
“The same two-and-a-half page memorandum, with only the names of the banks changed, was placed before the Boards of the other four associate Banks, namely, SBH, SBP, SBBJ and SBM,’’ according to them.
They said while a loan proposal of even Rs.10 crores coming before committees would contain an analysis of financials, this memorandum contained only “English, and no Arithmetic”.
“As independent Directors, we asked for details of the benefits of the mergers undertaken in the past, especially of State Bank of Saurashtra (SBS) and State Bank of Indore (SBI) and recorded our serious concerns on the proposal. But the data on working results after the merger of SBS and SB Indore were, however, not made available,” they added.
State role
Besides, the opinion of the Government of Kerala on the proposal ought to have been ascertained as the State was an important stakeholder. It was also pointed out that when State Bank of Indore was merged, matters came to a standstill for almost a year and there were practically no activities.
“Unfortunately, no reply was furnished for these observations and the minutes were completely ignored. We had hoped that the analysis and data, as sought for by us, would be furnished in the interest of taking of informed decisions. As shareholder’s representatives, we believe that informed decision-making is crucial on a matter as material as acquisition of business,” Mr. Joesph added
On August 11, 2016, a memorandum was approved by circulation by the Executive Committee of the Board authorising Mr. Adikesavan, CGM (CB) to represent SBT in negotiations with SBI. The memorandum also instructed that the authorised person would finalise the draft Scheme of Acquisition with his counterpart from SBI which will reflect the “conclusion of the negotiations”.
However, with out any negotiations, a meeting of the Audit Committee of the Board and the Board was convened in Mumbai on August 18 and important agenda like the swap ratio was brought in again as a “Table Item”, leaving no time or scope for any meaningful discussions. It was evident that “no negotiations” had taken place, both in terms of the Original Board Memorandum dated May 17, 2016 and the authorisation accorded by the Executive Committee.
