consolidate its operations.
SBI Commercial and International Bank (SBICI), a fully-owned unit with just two branches in Mumbai, is planned to be merged with India’s largest lender by the end of this year, said a senior official in the finance ministry.
Factoring services provider Global Trade Finance (GTF) — in which SBI owns a 92.60% stake and Bank of Maharashtra the rest — is slated for merger with SBI Factors, which is in the same line of business.
“Since SBICI is a wholly-owned subsidiary of SBI, there should not be any problem. For GTF, they (SBI) need to get approval from the board of Bank of Maharashtra,” he said.
SBI does not need the government permission to merge SBICI with itself, but the finance ministry has been informed of its intention.
In the case of GTF, the issue has been discussed informally between SBI and the finance ministry officials. SBI officials said Bank of Maharashtra has no objection to the merger plan, but an official view will be firmed up by its board.
SBI will take about a couple of months to invite bids from consultants to value BoM’s stake in the factoring company. SBI acquired its stake in GTF in 2008 from Exim Bank, IFC Washington and FIM Bank of Malta for Rs 521 crore.
“It makes complete sense to merge these two entities. With SBI Factors also operating in the same business as GTF, there is complete synergy between the two,” said a senior SBI official.
SBI Factors is owned 70% by SBI, while Small Industries Development Bank Of India and Union Bank of India own a fifth and a tenth of the stake, respectively.
SBI’s long-standing plans to merge its associate banks with itself have run into stiff opposition from the government’s former communist allies and the banks’ employee unions. Of the seven associate banks, it has managed to implement the merger of just one-State Bank of Saurashtra – last year.
SBI may renew the effort starting with the unlisted State Bank of Indore after finance minister Pranab Mukherjee last week threw his weight behind banks’ efforts to consolidate.
“Since State Bank of Indore is the smallest bank in terms of reserves, it would be easy to merge it within the company’s fold. Besides, we can use our experience in the merging process of State Bank of Saurashtra to iron out procedural issues,” the SBI official said.
State Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of Mysore are listed entities while State Bank of Hyderabad and State Bank of Patiala are not.
