Cabinet approves SBI takeover of units

Posted on:15 Jun 2016 18:06:40
Cabinet approves SBI takeover of units
15 June 2016 Current Affairs: Prime Minister Narendra Modi's cabinet has approved the takeover by State Bank of India of several subsidiaries, a government source said, in a first move to consolidate the country's struggling public sector banks.

As earlier proposed, SBI was due to take over five units that had been run at arms-length, as well as state-run Bharatiya Mahila Bank, a bank for women set up in 2013.

SBI 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.

The merged entity will create a banking behemoth, which can compete with the largest in the world with an asset base of almost Rs 37 lakh crore, with 22,500 branches and 58,000 ATMs as on December 2015. SBI alone has close to 16,500 branches, including 198 foreign offices spread across 36 countries.

The merger of SBI and its associate banks is a win-win for both. While the network of SBI would stand to increase,  its reach would multiply. One can expect efficiencies to be created from rationalization of branches, common treasury pooling and proper deployment of a large skilled resource base. Currently, no Indian bank features in the top 50 banks of the world. With this merger, some visibility at global level is likely to increase. Customers of associates and subsidiaries of the Bank will also be beneficiaries. Any introduction of new technology by SBI would simultaneously be available uniformly.

SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged. SBI has maintained since then that it would merge the others as well but none of its initiatives fructified due to lack of capital  which was pegged at least Rs 2,000 crore for each bank  and stiff opposition from the employee unions.

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