As a move to strengthen India’s public-sector banking corporation, State Bank of India (SBI), has decided to merge five associate banks from 1 April, first of its kind in the banking history of India.
The assets of State Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala (SBP) and State Bank of Hyderabad (SBH) will be transferred to SBI from 1 April, 2017, said SBI in a regulatory notification.
“The entire undertaking of SBBJ, SBM, SBT, SBP and SBH shall stand transferred to and vested in the State Bank of India from April 1, 2017,” SBI said following a government order.
With the merging coming to effect, officers and employees, exempting the board of directors and executive trustees of the associate banks, will become employees of SBI.
SBI will become a global-sized bank and could compete with the largest banks in the world, with the merging coming to effect. The bank will have an asset base of Rs 37,00,000 crore or over $ 555 billion, with 22,500 branches and 58,000 ATMs. It will have over 50 crore customers. SBI has close to 16,500 branches, including 191 foreign offices spread across 36 countries.
The five associate banks have 73,268 employees and have a total deposit base of over Rs 5 lakh crore and ATMs of 8,964 across India.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.
SBI had earlier said the corporate branches of its five associate banks will “fold up” into the parent bank as part of network rationalisation after their merger. As much as 60-70 per cent of the larger value accounts are common and SBI needed only one relationship manager for that, an official had said.
Though SBI has not yet revealed the branch or staff rationalisation plan, an official of State Bank of Travancore last week said the merger plan could lead to closure of SBT’s 30 per cent of branches. While the five associate banks have 6717 branches, SBT has alone 1,117 branches. The five associate banks are likely to make a voluntary retirement service (VRS) offer to their staff.
In a statement last week, SBI said, “the merger will result in creation of a stronger entity. This will minimise vulnerability to any geographic concentration risks faced by associate banks. This merger is an important step towards strengthening the banking sector through consolidation of public sector banks.”