The Cabinet on Wednesday gave its in-principle approval for State Bank of India’s proposal to bring its five associate banks into its fold. This comes barely a month after the SBI board had, on May 17, cleared a proposal to merge its five associate banks and Bharatiya Mahila Bank with itself.

Finance Minister Arun Jaitley had said on June 6 that the Centre would soon approve SBI’s proposal.

Commenting on the Cabinet decision, SBI Chairman Arundhati Bhattacharya said the merger will be a win-win for SBI and the associate banks. SBI’s network and reach would multiply, she said.

One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base.

Currently, no Indian bank features in the world’s top 50 banks, but following the merger, SBI, with assets worth $550 billion will come within striking distance.

Customers of associates and subsidiaries of the bank will also benefit, Bhattacharya added.

“Any introduction of new technology by SBI would simultaneously be available uniformly. The scale of operations and common cost would get rationalised. Overall, the synergies being pooled at one place are going to be a big positive,” she said.

SBI’s five associate banks are: State Bank of Bikaner and Jaipur (SBB&J), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala and State Bank of Travancore (SBT).

SBI already fully owns SBH and State Bank of Patiala, and has majority stakes in the other three. Bharatiya Mahila Bank started operations in 2013 and accounts for less than 0.1 per cent of SBI’s total assets.

News of the Cabinet approval spurred a sharp rally, of as much as 20 per cent, in the shares of SBT, SBB&J and SBM, which hit their 52-week highs.

State Bank of Patiala and SBH are not listed on the bourses.

Srivats.kr@thehindu.co.in

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