SBI, associate banks merger to start on 1 April

The government on Thursday said the State Bank of India (SBI) will start merging its five associate banks with itself, from 1 April, which will be the record date for the merger of the five subsidiaries.

The assets of all associate banks will stand transferred to SBI from 1 April 2017. Accordingly, all shares of these associate banks would cease to exist as individual entities and would stand transferred to SBI, as per a gazette notification dated 22 February released on Thursday.

SBI will first merge State Bank of Bikaner and Jaipur (SBBJ), followed by State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Hyderabad (SBH) and State Bank of Patiala (SBP).

State Bank of Bikaner and Jaipur, an associate of State Bank of India, said on Wednesday that it will be completely acquired by its parent with the start of the next financial year 2017-18, becoming possibly the first of the five units to amalgamate with the giant.

After the merger, SBI is set to be among the top 50 large banks in the world. SBI was ranked 52 in the world in terms of assets in 2015, according to Bloomberg.

Earlier this month, the Union Cabinet had approved the merger of State Bank of India and its five associate banks, paving way for bolstering the business operations of the state-run lending behemoth. The merger of SBI with its associates will lead to operational efficiency within banks and will lead to reduced cost of funds, finance minister Arun Jaitley said at a press briefing. ''SBI will become a global player post associate bank merger,'' he said.

Since the shares of SBP and SBH are not listed on the stock exchanges, the notification said the entire share capital of the two banks would, without any further act, deed or instrument, stand cancelled and its share certificates representing such shares would also be deemed to be automatically extinguished.

In case of the other three associate banks, the notification states that the shares would be delisted on 1 April. The shares would be converted to those of SBI, according to the swap ratio approved by the bank's board and the government.

As per the merger ratio approved by the SBI board in August 2016, investors in SBBJ will get 28 SBI shares for every 10 held in SBBJ while investors in SBM and SBT will get 22 SBI shares for every 10 shares held.

The boards of these five banks stand dissolved and the whole-time directors, including the managing directors, will cease to hold office.

The consolidated balance sheet of the merged entity would be Rs3,200,000 crore. The merged entity would have deposits worth Rs2,600,000 crore and nearly Rs1,876,000 crore worth advances on its books.

The bank would have 23,899 branches and an employee strength of 271,765.

As far as employees are concerned, their present wages will be protected. They will be offered a wage package relevant to SBI employees of the various grades.

In any case, they will be given a choice to either accept that or retain the package they currently have.

The whole process of merging SBI and its subsidiaries has faced resistance from employee unions fearful of job losses.

The five associate banks recorded a combined loss of Rs789 crore in the latest quarter, widening from Rs181 crore in the year-ago period.

Yet, there will be benefits from a merger as this will bring more flexibility through merger of branches and their operations, including in the running of treasury.