The Hindu Business Line : Boards of 6 SBI associates to consider merger move on Jan 25

Transformation moves
Irked PSU bank unions to stage dharna on Jan. 4
Of its 7 associates, merger of State Bank of Saurashtra approved.
SBI controlling interests range from 75-100%

K.R. Srivats

New Delhi, Dec. 24 The consolidation process in the Indian banking industry is set to get a new momentum in January next year, with the boards of six associate banks of the State Bank of India slated to meet on January 25, 2008 to consider in-principle nod for their merger with State Bank of India, India’s largest commercial bank.

SBI has seven associate banks including State Bank of Saurashtra, whose merger with the parent bank has already been approved by both the boards and awaiting Government and RBI approval.

The other six are State Bank of Travancore, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore, and State Bank of Patiala.

SBI’s controlling interests in the associate banks range from 75 per cent to 100 per cent.

As and when the consolidation move goes through, SBI is expected to transform itself to a banking giant. It is already one of the largest banks in Asia.

The consolidation move stems from the need to shore up size, which has been a limiting factor for Indian banks as only 22 of them figure in the top 1,000 in the world. Mergers have been advocated as a strategy for Indian banks to make them bigger and face global competition.

In the domestic market too, late private sector entrants such as ICICI Bank have grown much beyond many public sector banks on the back of aggressive marketing of products besides some merger initiatives. Public sector banks too have been looking for consolidation opportunities, but none have materialised so far.

‘Will not force’

Though the Finance Minister, Mr P. Chidambaram, has been pushing for consolidation in the Indian banking industry, he has made it clear that the Government would not force any of the entities to go in for mergers.

The initiative has to come from the banks themselves, Mr Chidambaram had said.

The latest move to convene a board meeting of the associate banks in January 2008 has irked the employee unions of all public sector banks, who have decided to call a dharna on January 4 before the banking division in the Finance Ministry here to express their opposition to the merger plans.

“SBI management is looking to promise pension as third benefit to the 70,000 employees of the associate banks.

“This will result in serious discrimination and distortion in existing uniform service conditions covered under the bipartite agreement,” Mr C.H. Venkatachalam, Convenor of the United Forum of Bank Unions (UFBU), told Business Line.

Besides the dharna on January 4, he also said that all bank employees and officers are likely to undertake a nationwide strike in late January 2008.