SBI begins working on framework for merger of subsidiaries
13 Jun 2016 11:32 PM GMT
“A team of 15-20 members has been set up and it has started working on the framework for the merger. The team is headed by a general manager and there are a few deputy general managers,” a source said.
The team has been formed under the supervision of associate and subsidiaries department, which is being headed by managing director V G Kannan. “If everything works fine, in 3-4 months the process is likely to begin,” he said.
Last month, the bank’s board had submitted a proposal to the government for merging its five subsidiaries and first women-oriented lender Bhartiya Mahila Bank with itself.
“This merger discussion is purely exploratory at this stage and is not certain. A proposal seeking an in-principle approval to start negotiations with associate banks will be submitted to the government,” SBI had said in a statement issued after its board meeting last month. SBI has five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
“The idea is to merge all the five associate banks at the same time. They are on the same technology platform, which SBI has... it will not be a difficult process,” the source added.
It is unclear whether the team which is looking into merger processes of the five subsidiary banks with SBI is also laying the groundwork for Bharatiya Mahila Bank’s inclusion at this juncture.
Recently, Finance Minister Arun Jaitley had said the Centre is evaluating the merger proposal and will soon respond. “We are looking at SBI (proposal) at the moment. It is with the government and (it) will respond. The government’s policy, by and large, supports consolidation. I have indicated that in the budget itself,” he said after a meeting with the heads of public sector banks and financial institutions held last week. When asked how soon the government nod will be given to the proposal, Jaitley had said: “We are expecting (approval) shortly.”
Immediately after the announcement, the associate banks’ employee union had termed the board’s decision as arrogant and had gone on a nation-wide strike on May 20. The employee unions of these five associate banks have called for a strike on June 28 and July 29 to protest the proposed merger.
Moreover, on June 9, the newly inducted CPI(M)-led LDF government in Kerala had opposed the merger of State Bank of Travancore with SBI, becoming the first state government to lodge a protest.
“People of the state consider SBT as a bank of Kerala and the government also has the same view. We want SBT to remain as it is,” Chief Minister Pinarayi Vijayan had told reporters.
Among the five subsidiary banks, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed entities. The merged entity will create a banking behemoth, which can compete with the largest in the world with an asset base of Rs 37 trillion (Rs 37 lakh crore) or over $555 billion, with 22,500 branches and 58,000 ATMs as on December 2015. SBI alone has close to 16,500 branches, including 198 foreign offices spread across 36 countries. SBI first merged State Bank of Saurashtra with itself in 2008.
Two years later, State Bank of Indore was merged. SBI has maintained since then that it would merge the others as well but none of its initiatives fructified due to lack of capital (which was pegged at least Rs 2,000 crore each per bank) and stiff opposition from the employee unions.
‘Telangana to lose revenue if SBH merged with SBI’
Fearing revenue loss for Telangana after merger of State Bank of Hyderabad with parent SBI, CPI General Secretary S Sudhakar Reddy on Sunday said the state assembly should pass a resolution opposing the amalgamation.
SBH employees, along with the staff of other associate banks including State Bank of Travancore, would join a two-day strike on July 28 and 29 against the proposal, Reddy who is also the honorary president of Andhra Pradesh and Telangana Bank Employees Federation (APTBEF) said here. Last month, State Bank of India’s board had submitted a proposal to the government for merging its five subsidiaries and first women-oriented lender Bhartiya Mahila Bank with itself. The associate banks are -- State Bank of Bikaner & Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
“Recently, Finance Minister Jaitley in his discussion with bank unions had suggested we can think of an alternative to merging of these five state banks. But suddenly, they called a meeting on May 17 and forced to request a merger of these banks though the workmen directors opposed it,” he said. He listed three issues with the proposed merger. First problem, he said, is “psychological” as SBH was founded by the Nizam of Hyderabad and it is a profit-making bank (Rs 1,061 crore this year).
“There is no reason why this bank, which is looked by the people as ‘a Telangana bank’, should be merged. Being a bank that was founded in Andhra Pradesh, Telangana those days, a share of the profit is given to the state government. If it goes to SBI, it will go to the registered office, it will go to the Maharashtra government,” Reddy said.
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