From April 1, the country’s banking behemoth State Bank of India (SBI) will grow even bigger in size to become a Rs 44-lakh crore entity after the merger of five associate banks — State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — with SBI, making it the world’s 45th largest banking entity. “We would not like to have a situation where two branches of SBI are next to each other. We would rather space them out,” says SBI managing director (associate banks) DINESH KUMAR KHARA. Excerpts:
How will you tackle branch rationalisation as branches of SBI and associate banks are next door in many locations?
Normally, branches which are next door are in metro locations. We may be next door to each other in old locations. We can always use these licences to reach out to those places where we are not present. Eventually, we will get into that process by the second quarter of the next financial year. Our broad philosophy or policy in this context is to reach out as many customers as possible using these licences.
Does it mean branches which are close by will be relocated?
All branches of associate banks will become SBI branches on April 1. We will be relocating those branches to other locations. We have to be nearer to the customers. We will take the branch to another location. We will rationalise the cost of operations. About 90 per cent of the book is common for SBI and associate banks. For the same account, we are now having five relationship managers from associate banks. Now, we will have one manager who will serve the total consortium.
There are reports of a plan to close down many branches of associate banks in several states. Do you have any such plan?
As of now, it’s more of speculation and conjecture. Our effort is to reach out as larger a population as possible … where our footprints are not there, we would like to be there. We have got a plan of rationalisation. We would not like to have a situation where two branches of SBI are next to each other. We would rather space them out. That’s our plan.
Don’t you think that there will be surplus manpower after merger? How will you address this situation?
Surplus is a function depending upon how we are growing. It’s also a function of how much digitisation we’re offering. For a growing economy like ours, we would like to have an optimum utilisation of manpower resources. We would like to offer many more services from our counters. We will be in a position to enlarge our bouquet of services for the corporates and we would like to utilise the manpower accordingly.
Have you launched a voluntary retirement scheme (VRS)? What has been the response so far?
There’s a reason for launching the VRS. When we were engaged in talks with officers’ associations, this is one demand which came up. The reason is that some people may not be comfortable in adjusting themselves to the new environment. It’s a change… people may not be accustomed to accepting a change which they have not seen all through life. We offered the VRS.
The response as of now is what we were expecting. Actually, 12,000 people are eligible for VRS out of the staff strength of 70,000 in associate banks. The response is in line with our expectations. It will close on April 5.
How will borrowers benefit from the merger?
Our MCLR (marginal cost of funds-based lending rate) is much lower than that of associate banks. That’s one benefit corporates will have and lending rates will be much lower than that of associate banks. Our ability to raise resources globally is better than associate banks and we are in a position to raise resources at a cheaper rate also.
Will the bad debts of associate banks be a problem for SBI after merger?
In any case, whatever be the quality of assets in those banks, it will remain with us. From the quarter ended September, we had started synchronising them with the asset quality of the main bank. Accelerated provisioning was done in associate banks in the run-up to the merger. The provision coverage ratio (PCR) after merger will be around 59 per cent. SBI’s PCR was 64 per cent as on December 31, 2016.
What’s the combined business of the merged entity? What will be SBI’s market share after the merger?
As of December 2016, we were about Rs 44 lakh crore. SBI was at about Rs 34 lakh crore before the merger. The share of SBI after merger will be around 23-24 per cent. Before the merger, it was 18 per cent.
Will the merger attract the provisions of the Competition Commission of India?
We were having majority stake in these banks. By virtue of that position, we were not covered by the Commission. For Bharatiya Mahila Bank (BMB), we went to the Competition Commission (of India) because we did not have majority ownership in BMB. Even today, only 40 per cent of staff in BMB is women. In SBI, out of the employee strength of 2.07 lakh, 22 per cent of staff is women.