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Cabinet clears merger of SBI, associate banks; stocks rally

State Bank shares jump after announcement, 3 associate banks spurt 20% each.

By: ENS Economic Bureau | Mumbai | Published: June 16, 2016 1:51 am
SBI, SBI associates, SBI associates bank, State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore, State Bank of Hyderabad, Bharatiya Mahila Bank, new associates bank in SBI, finance news, Business news, banking news Share prices of SBI and three listed associate banks shot up on the BSE after the announcement. While SBI rose by 3.90 per cent to Rs 215.65, State Bank of Bikaner, State Bank of Mysore and State Bank of Travancore vaulted by 20 per cent each.

In the first move to consolidate the country’s struggling public sector banks, the Union Cabinet on Wednesday approved the merger of State Bank of India (SBI) and its five associate banks.

SBI had last month mooted the proposal for merger of its five subsidiary banks with itself and acquisition of the newly set up Bharatiya Mahila Bank. SBI has five associate lenders — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.

Share prices of SBI and three listed associate banks shot up on the BSE after the announcement. While SBI rose by 3.90 per cent to Rs 215.65, State Bank of Bikaner, State Bank of Mysore and State Bank of Travancore vaulted by 20 per cent each.

SBI chairman Arundhati Bhattacharya said, “The merger of SBI and its associate banks is a win-win for both. While the network of SBI would stand to increase, its reach would multiply. One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base.”

She said that 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. Customers of associates and subsidiaries of the Bank will 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.

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The merged entity will have an asset base of Rs 37,00,000 crore, 22,500 branches and 58,000 ATMs. It will have over 50 crore customers. SBI has close to 16,500 branches now, including 191 foreign offices spread across 36 countries. SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with SBI.

SBI has set up a crack team to prepare a framework for amalgamation of five associate banks with itself. A team of 15-20 members has been set up and it has started working on the framework for the merger. The team is headed by a general manager and there are a few deputy general managers, sources said. The team has been formed under the supervision of associate and subsidiaries department, which is being headed by managing director V G Kannan.

Soon after the merger announcement in May, the associate banks’ employee union had termed the board’s decision as arrogant and had gone on a nation-wide strike on May 20. The employee unions of these five associate banks have called for a strike on June 28 and July 29 to protest the proposed merger. Meanwhile, bank unions came out strongly against the merger. “When employees of associate banks are already on agitation against such forceful merger, the decision of the government ignoring the views of employees is unwarranted. This is nothing but provocation that will derail the industrial relations in the banking Industry leading to more struggles and agitations,” said Vishwas Utagi, vice president, All India Bank Employees Association (AIBEA).

“We also feel that such action will force other public sector banks to go for such mergers much against their will. We oppose this move. We shall unleash more and more agitations including a series of strikes to reverse such forceful mergers and acquisitions,” he said.

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    Nathan
    Jun 16, 2016 at 7:32 am
    IN A FREE MARKET, BUSINESSES MAY BE EXCEPT DEFENSE IN THE CASE OF INDIA MUST BE IN PRIVATE SECTOR. WHY GOVERNMENT SHOULD INFUSE FUNDS INTO THE BANING SECTOR SO THAT BANKS WILL HAVE ADEQUATE CAPITAL ET RATIO! IT IS A GOOD MOVE BY MR. MODI'S GOVERNMENT AND IN THE SAME WAY OTHER NATIONALIZED BANKS ALSO MUST BE MERGED SO THAT TOO MANY BANK BRANCHES IN THE VICINITY OF ONE ANOTHER CAN BE SHUT DOWN. IN SOME CITIES MORE THAN THREE OR FOUR BANKS' BRANCHES ARE LOCATED WITHIN 100 METERS. MORE ATMS SHOULD BE OPENED WITH LOT OF THRUST ON ONLINE AND MOBILE BANKING SO THAT BANKS ARE RUN MORE EFFICIENTLY . PLASTIC MONEY MUST SLOWLY REPLACE THE PAPER CURRENCY.
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      Amit Yadav
      Jun 16, 2016 at 7:57 am
      consolidation is very necessary looking at our banks NPA results...they just cant always keep asking for taxpayers money without showing accountability...great step...now dont knell before such pressure groups...
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        Rajeev
        Jun 16, 2016 at 3:45 pm
        Merger of ociate banks with SbBI was long awaited. Employees are happy
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          Rajesh
          Jun 16, 2016 at 5:14 am
          The Govt needs to get out of running businesses. Why does the govt run airlines, banks, telecoms etc? We all know govt is bad at it, and the pvt sector can do a much better job. Dont keep operating these loss making enies just because some lefties and socialists made them up. Sometimes I wish the right-wing party was more right-wing.
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            Jon
            Jun 16, 2016 at 7:32 am
            Let the bank clarify the pros and cons of the merger to the Industry, Employees and Customer....lt;br/gt;lt;br/gt;Strike is sometime used a tool to stall moves which can be beneficial....but the employees going on strike to explain the reason why they feel a particular move is against....rather than making decisions based on some political agenda...which in this case might be the fear of local trade unions losing their clout on the banks employees....
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