The Hindu Business Line : Bhatt explains why associate banks should pay royalty to SBI

The idea of charging royalty, which was mooted by the SBI in March, is being discussed by the boards of various associate banks and the decision is likely to be taken in the next few months, according to bankers.

“It is at a discussion level and the decision might be taken by the end of this year. SBI will urge the banks to accept this soon,” said Mr K. Vijaya Kumar, General Manager, Treasury, State Bank of Mysore.

State Bank of India had demanded a royalty of about one per cent of the associate bank’s net profit for using the bank’s logo. The pricing was more on account of security than for the purpose of earning revenue, according to SBI’s Chairman, Mr O.P. Bhatt.

SBI has six associate banks – 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.

Explaining the reason for charging the royalty, Mr Bhatt said, “As we are trying to become a global multilateral financial institution we need to put in place certain best practices which are advantageous for such an institution. For example, we should have a clutch of companies to make a mark at the global level; an individual company cannot do it. So, for the purpose of branding and recognition by our clientele we need to have common brand, common logo, common font and the only way to ensure that is by making sure that it is registered and patented and by making it a priced item. The pricing is therefore not for revenue but for security,” Mr Bhatt told Business Line here recently.

The charging of royalty from associate banks becomes particularly important for SBI, as this would be the first step towards charging royalty from its foreign ventures.

“SBI has collaborations and joint ventures with some foreign entities in various sectors. If they do not collect royalty from their own subsidiaries here it will be difficult for them to ask for royalty from their foreign partners,” Mr Vijaya Kumar said.

However, some of the associate banks such as State Bank of Bikaner and Jaipur and State Bank of Patiala have objected to SBI’s demand for royalty.

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