SBI seeks govt nod to merge 5 associate banks, BMB

NPA-laden State Bank of India (SBI) on Tuesday proposed the merger of its five associate banks and the newly created Bharatiya Mahila Bank (BMB) with itself, in a move that would help the country's top bank dilute its mountain of bad debt and sought government's approval for the same.

SBI's move to seek ''in principle sanction'' of the central government for a merger of the six bank comes after the boards of the six banks at a meeting in Mumbai on Tuesday reportedly discussed the possibility of a merger with SBI.

The move, however, is being opposed by employees of the six banks.

The All India Bank Employees Association (AIBEA) has, on the other hand, proposed the merger of the five SBI associate banks to form a larger bank (See: Five SBI associates may merge into a new state bank). After the meeting, the five SBI associates - State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad - informed stock exchanges that they have initiated merger talks with SBI.

The Bharatiya Mahila Bank Ltd, the first of its kind in India formed with a vision of economic empowerment for women, however is having teething problems and needs support.

The five associate banks have a cumulative advances base of Rs3,78,000 crore and a deposit base of Rs5,03,000 crore. SBI, the parent bank, had advances of Rs13,91,000 crore and deposits of Rs16,71,000 crore at the end of the December 2015 quarter.

''The benefits of the merger would be huge. The merger will witness a reduction of lending costs by 100 basis points within a year post this merger,'' SBI chairperson Arundhati Bhattacharya was quoted as saying.

According to Usha Anathasubramanian, managing director and chief executive officer of Punjab National Bank (PNB), a consolidation of banks is inevitable as none of the Indian banks is comparable with global banks in size and scale of operation.

Of the 27 scheduled commercial banks in India, not one, even SBI, has the size and scale comparable to major global banks.

SBI, India's largest commercial bank, is still not among the top 50 banks in the world. It is ranked only 67th among its global peers.

''Though the sector counts 27 scheduled commercial banks, not one figures in the global top 20. There's a need to create 2-3 large Indian banks,'' The Indian Express quoted the PNB chief as saying

Employees, however, are apprehensive of the motives of the merger. They fear it is a cover-up for the mounting bad loans, especially, of SBI. Employees affiliated to the All India Bank Employees Association (AIBEA) are protesting any such move and are threatening to go on a nationwide strike on 20 May.