The Union Finance Minister, Mr Pranab Mukherjee’s accent on banking industry’s consolidation at a meeting with bankers last week will, in all likelihood, spur the State Bank of India to complete its unfinished agenda, that is implementing the merger of its six associate banks, according to senior officials at some of these associate banks.
Earlier, while announcing the bank’s annual results here recently, Mr O.P. Bhatt, Chairman, SBI, had said the bank, all geared for the mergers, was only waiting for the green signal from the government.
“We will look at mergers of other associate banks as that will give us scale of operations, cost savings and broadbase human resources. However, the timeframe will depend on the government,” Mr Bhatt had mentioned. The merger of the six associate banks might not take more than three-six months once the bank received signal from the government, he had indicated earlier.
State Bank, the Chairman had said, had already worked out a home-grown strategy for implementing the mergers and would go ahead with it one by one. Talking about the merger of State Bank of Saurashtra with SBI, his observation was, “There was not even a ripple, the merger was smooth and we can do the same with other associate banks as well.”
Senior officials at some of the associate banks feel that merger was an eventuality and would happen soon. “Associate banks might take some time to respond but would in any case have to accept it as the government seems to be keen to effect their merger with SBI,” said Mr K. Vijaya Kumar, General Manager (Treasury), State Bank of Mysore.
The process might start within six months and would be complete within a year, said a senior official at the State Bank of Indore. Talking about the advantages of a merger the official said, “It will give us economy of scale. We need to be stronger on various parameters in order to meet global standards and therefore it makes sense to consolidate,” the official, who did not wish to be identified, said.
The technology, treasury, systems and procedures of associate banks were already in line with that of SBI, the official pointed out.
Opposition
However, the Associate Banks’ Officers’ Association (ABOA) is opposed to the idea of merger. “All the associate banks are doing well, none of them are incurring losses. In fact, these banks have carved out a niche for themselves so there seems to be no reason why they should be merged,” said Mr M. Harshvardhan, General Secretary, ABOA.
Size alone, Mr Harshvardhan felt, could not make a bank globally competitive. “Many big banks in the West have collapsed; it is not the size but the ability and financial parameters that determine the strength of a bank,” he said. A merger might bring about rationalisation of branches, thereby affecting financial inclusion, he said. The customers of associate banks might prefer some other smaller banks for personalised service, he added.
Source: The Hindu Businessline