SBI merges with five associates

The Dollar Business Bureau
The alliance of State Bank of India with five of its associates will give shape to a new entity, which is expected to enter the list of top 50 banks across the world in terms of assets.

The merger of SBI with State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner and Jaipur and Bharatiya Mahila Bank received a nod from the Union Cabinet on Wednesday.

While the deposit base of the entire bank system accounts for Rs.97 lakh crore, the new entity will command a deposit base worth Rs. 21.5 lakh crore.

The main reason for taking the merger ahead, according to SBI, is cost saving and synergies.

Arundhati Bhattacharya, Chairman, SBI, stated that the merger will not only help the network of bank to increase, but also multiply the reach. Efficiencies, common treasury pooling and deployment of skilled resources can be expected from the restructuring of the branches.

However, CSLA claims that the integration will be highly challenging. The challenges could majorly arise from large, unionized staff and some weak PSUs, balance sheets, says CSLA, Asia’s leading and longest-running independent brokerage and investment group.

CSLA also believes that the merger has potential to divert the attention from increase in current savings account and improving asset quality to management of the new entity.

However, for customers, particularly that of the associates, the alliance will enable to access better SBI services and also will help them enjoy wider network of branches and ATM. It will also help them obtain lower interest rates on loans.

Meanwhile, the merger ratios are yet to be announced by SBI.