Cabinet approves merger of associates with State Bank

The Union Cabinet has approved the merger of State Bank of India (SBI), the country’s largest lender, and its associate banks — a move which is expected to bring the state-owned entity on a par with global lenders.

The merged entity will have an asset base of about Rs.37 lakh crore, with nearly 24,000 branches and about 58,700 ATMs across the country as of March 2016-end . SBI and its associates employed 2.85 lakh people in 2014-15.

Global visibility

“The merger of SBI and its associate banks is a win-win for both,” SBI chairperson Arundhati Bhattacharya said following the Cabinet announcement. “While the network of SBI would stand to increase, its reach would multiply.” She said the bank expected efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base. “Currently, no Indian bank features in the top 50 banks of the world. With this merger, some visibility at global level is likely to increase,” Ms. Bhattacharya said.

Ms. Bhattacharya said that customers of associates and subsidiaries would also be beneficiaries. “Any introduction of new technology by SBI would simultaneously be available uniformly. The scale of operations and common cost would get rationalised. Overall, the synergies being pooled at one place are going to be a big positive,” she said.

The merger of SBI with its associates began eight years ago when SBI merged State Bank of Saurashtra with itself in 2008. In 2010, State Bank of Indore was also merged with the larger bank. SBI has since made repeated attempts to merge its units but none came to fruition due to a shortage of capital.

Shares rise

The shares of SBI associate banks rose sharply after the cabinet approval. Those of the three listed associate banks that, State Bank of Mysore, State Bank of Travancore and State Bank of Bikaner and Jaipur were up 20 per cent each. SBI shares were up 3.9 per cent to close the day at Rs. 214.65 while the benchmark Sensex rose 1.25 per cent or 330 points to reach 26,726.

Other decisions

The Cabinet gave its ex-post facto approval to the Memorandum of Understanding (MoU) between Taipei Economic and Cultural Centre in India and India Taipei Association in Taipei, for cooperation in agriculture. The Cabinet was apprised of the MoU between the Department of Space and Indian Space Research Organisation (DOS/ISRO) and the Canadian Space Agency (CSA) on cooperation in the field of outer space.

The signing of an Air Services Agreement between India-Taipei Association in Taipei (India’s representative office in Taiwan) and Taipei Economic and Cultural Centre in India (Taiwan’s representative office in India) got the nod.

The Cabinet also gave its approval for the enhancement of the age of superannuation of non-teaching and public health specialists of the Central Health Service (CHS) from 62 years to 65 years and doctors of General Duty Medical Officers sub-cadre of CHS to 65 years of age.

An ex-post facto approval for a pact on labour cooperation between India and Saudi Arabia and a 10 per cent disinvestment of paid-up equity in Housing and Urban Development Corporation were also cleared.