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K.R. Srivats

New Delhi, Nov. 6

State Bank of India has been told by the Government to refrain from going in for further acquisitions of associate banks within the SBI Group.

The Government wants other public sector banks to come up in competition to the SBI.

The Government is preparing a “comprehensive paper” for taking a “holistic view” on consolidation in the public sector banks and mergers within the SBI Group, official sources said.

Indications are that the comprehensive paper would cover aspects such as effect of reduced competition in case of consolidation within the SBI Group and in the banking industry.

Over the last two years, SBI has been on a fast track with regard to acquisition of its associate banks as part of its attempts to gain size on a global scale and get more economies of scale.

Having acquired State Bank of Saurashtra last year, the SBI top management had this year initiated steps to acquire State Bank of Indore, which is the smallest among the existing six associate banks.

The boards of both SBI and State Bank of Indore had passed resolutions approving the transaction.

The Centre had last month given in-principle nod for SBI to enter into negotiations for acquiring the business of State Bank of Indore.

In both the cases, SBI has only gone in for acquisitions. There is a provision in the SBI Act that allows acquisition of other banks including associate banks, banking industry sources pointed out.

Meanwhile, the All India Bank Employees’ Association (AIBEA) plans agitations this month-end to protest against consolidation efforts within the banking industry, the association’s General Secretary, Mr C. H. Venkatachalam, told Business Line.

More Stories on : Public Sector Banks | Mergers & Acquisitions | State Bank of India

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