Dear Aspirants,
Consolidation of banks is in the air yet again, with the boards of the five associate banks of State Bank of India (SBI) set to meet in Mumbai today. Although no specific proposal relating to merger or consolidation is listed on the agenda, the buzz is that the respective boards will discuss this issue along with other hot topics such as the non-performing loans situation and the Reserve Bank of India-mandated asset quality review.
The country’s largest lender has five associate banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. Among these, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed.
SBI first merged associate State Bank of Saurashtra with itself in 2008. Two years later in 2010, State Bank of Indore was merged.
The government recently set up the Bank Board Bureau (BBB) to look into the issues including consolidation in public sector banking space.
The BBB headed by former CAG Vinod Rai had conducted interview for appointments of Managing Directors of some of the banks where posts will be falling vacant during the current fiscal.
The Bureau was constituted to help the government select heads of public sector banks and financial institutions and assist banks in developing strategies with regard to capital-raising and consolidation. Besides Chairman, the Bureau has three ex-officio members and an equal number of expert members.
Expert members are ICICI Bank’s former joint MD H N Sinor, Bank of Baroda’s former CMD Anil K Khandelwal and rating agency Crisil’s ex-chief Rupa Kudwa.
Its ex-officio members are Secretary, Department of Public Enterprises, Financial Services Secretary and RBI Deputy Governor.
Rather than looking to merge them with SBI, the five associate banks may discuss their unification into a single entity to consolidate their business potential and ensure independent growth and progress, it is learnt. Should that happen, the combined entity will have total deposits of ₹5,00,845 crore and total loans of ₹3,97,796 crore.
Board agenda:
The board agenda for Tuesday’s meeting includes “any other issues with the permission of the Chair”, giving some credence to expectations of a discussion around consolidation.
Finance Minister Arun Jaitley is in favour of the five SBI associate banks banded into one bank so that together they become stronger and viable, sources said.
On their part, the 70,000 employees and officers working in these five banks have also demanded unification.
“When we (All India Bank Employees’ Association) had, as a delegation, called on Finance Minister Jaitley on March 23 and April 26, he (Jaitley) had opined and suggested that these five associate banks could well be made into one single bank. We had also expressed our inclination for the same,” CH Venkatachalam, General Secretary, AIBEA, told BusinessLine.
“AIBEA has written another letter (on May 14) to the Finance Minister seeking a “positive and early” decision in this regard. In his Budget speech this year, Jaitley had said that a roadmap for consolidation of public sector banks (PSBs) would be spelt out. At the March 2016 Gyan Sangam Summit, he had indicated that the government was actively looking to form a bank consolidation committee.”
Small globally:
Banking industry observers and experts maintained that there is a case for merging some of the public sector banks, which are very small when compared to their global peers.
SBI, India’s largest commercial bank, is still not among the top 50 banks in the world. It is ranked only 67{+t}{+h} among the global banks. For an economy such as India’s — the fastest growing large economy in the world — the domestic banking industry is fragmented. The thinking in certain quarters is that India needs stronger banks, not lots of banks.
During the United Progressive Alliance (UPA) regime, two associate banks — State Bank of Indore (2010) and State Bank of Saurashtra (2008) — were merged with the SBI.
Source:- The Hindu BusinessLine & Business Standard