State Bank of India, has requested for at least 30 days’ time from the announcement of the effective date of merger of associate banks for consolidation of their books. Thus the merger of SBI with its five subsidiaries, may be carried over to the next financial year ie., 2018.
Meanwhile, the Cabinet has approved the merger process of five SBI subsidiaries with it which are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. This does not include the merger of Bharatiya Mahila Bank. The Finance ministry says that the merger will lower the cost of funds of State Bank of India.
The Government has assured the employees that the merger would not be in the detrimental interest of the employees. The merger would involve lot of information technology changes and by February the system changes is expected to be frozen. SBI had cleared the proposal for the merger last May. Following are the developments.
- The merger will bring out a bank with a projected asset book of Rs. 37 lakh crore by March 31st which reads Rs. 33.5 lakh crore as on 31.12.2016.
- A formal notification will be sent by the Government of India, on the exact date of merger.
- Two additional Circles under the National Banking Group (NBG) are expected to be created, for including the additional branches and network of the associate banks post-merger. Also a Circle based in Jaipur and one for Andhra Pradesh would come up.
- As of now 14 circles PAN India under NBG, take care of the banking needs of Individuals, micro and small enterprises and rural banking.
- The board of five associate banks would meet separately to approve the results for the quarter of 2016-17 and the first balance sheet of the combined entity is expected to come up at the end of the first quarter of 2017-18.
- Once the effective date is announced by the Government, the associate bank employees will be given an offer letter to get their acceptance for joining the merged entity or to take a call to part with. People willing to move out will be provided with a VRS scheme. The compensation payable would be linked to the number of years of service left.
- Integration of Human resources systems and information technology process will be processes simultaneously, which would be on the basis of their past performance.
The bank spells, that:
- The merger would result in creation of a stronger entity.
- The merger would reduce the vulnerability to any geographic concentration risks faced by the associate banks.
The merger would result in strengthening the banking sector in total, through the consolidation process of public sector banks.
- The merger is expected to result in recurring savings estimated at more than Rs. 1000 crores in the first year, through combination of enhanced operational efficiency and reduced cost of funds.