The Hindu Business Line : State Bank of Indore to be merged with SBI

New Delhi, June 19 Less than a fortnight after the Finance Minister, Mr Pranab Mukherjee, endorsed the consolidation process among State-owned commercial banks, State Bank of India (SBI) has set the ball rolling.

The board of State Bank of Indore on Friday passed a resolution that would pave the way for its merger with the SBI. Currently, the SBI holds 98.05 per cent stake in State Bank of Indore, which is the smallest associate bank.

In a corresponding move, the SBI board that met in Mumbai passed a resolution to merge State Bank of Indore with the parent bank. This will be the second associate bank of the SBI — after State Bank of Saurashtra in July 2008 — to be consolidated with the parent. If State Bank of Indore gets merged, only five associate banks would independently exist within the Group. These are State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore, and State Bank of Patiala.

The latest consolidation attempt has come despite the Government-Reserve Bank of India appointed Committee on Financial Sector Assessment (CFSA) recommending that banks should not be hasty in merger efforts in the current economic environment. The RBI Deputy Governor, Dr K. C. Chakrabarty, had also recently noted that time was not ripe for consolidation among the public sector banks and that they should focus more on financial inclusion than on consolidation.

State Bank of Indore became a subsidiary of the SBI in 1960. It has about 500 branches, with as many as 357 in Madhya Pradesh. For the year ended March 31, 2009, it recorded a net profit of Rs 278.92 crore. Its total business was about Rs 50,500 crore as on March 31. It has a network of 400 automated teller machines (ATMs).

At Friday’s board meeting of State Bank of Indore in Indore, the workman-director, Mr Atul Pradhan, gave a dissenting note on the resolution that was brought in towards the end of meeting as a table agenda.

The board approved the resolution by a majority vote with five members favouring the proposal and only one (the workman director) dissenting, sources familiar with the developments said.

There was no officers’ representation at the meeting as the board seat for officers is currently vacant, Mr Alok Khare, President of the All India Bank Officers’ Association, told Business Line.

Banking industry observers noted that it would be interesting to see if the proposed merger of State Bank of Indore with SBI would come under the scanner of the Competition Commission of India (CCI). Incidentally, while the CCI is functional, the provisions pertaining to regulation of combinations under the Competition Act are yet to be notified.

Related Stories:
SBI gears up for consolidation, awaits govt green signal
Employees of SBI associates say no to consolidation

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