Hint­ing at More Con­sol­i­da­tion

The Economic Times - - Fi­nance & Com­modi­ties -

The Cabi­net Com­mit­tee on Eco­nomic Af­fairs also ap­proved the award of con­tracts to de­velop 31 ar­eas com­pris­ing 44 dis­cov­ered small hy­dro­car­bon fields that had been ly­ing un­de­vel­oped for decades. This is ex­pected to speed up com­mer­cial devel­op­ment of these fields.

In June last year, the gov­ern­ment had given an in-prin­ci­ple ap­proval for the merger of the as­so­ciate banks with State Bank of In­dia.

“We have now en­tered the last lap,” State Bank of In­dia chair­man Arund­hati Bhat­tacharya told ET. “Merger will cre­ate a stronger, more ef­fi­cient (and) vi­brant en­tity. Date (of the merger) will be as per (gov­ern­ment) no­ti­fi­ca­tion.”

The SBI-as­so­ciate merger is an im­por­tant step to­wards strength­en­ing the bank­ing sec­tor through con­sol­i­da­tion of pub­lic sec­tor banks, a gov­ern­ment state­ment said, sug­gest­ing the pos­si­bil­ity of more con­sol­i­da­tions.

“It is in pur­suance of the In­drad­hanush ac­tion plan of the gov­ern­ment (to re­vamp func­tion­ing of state-run banks) and it is ex­pected to strengthen the bank­ing sec­tor and im­prove its ef­fi­ciency and prof­itabil­ity,” it noted.

State Bank of In­dia’s shares closed 0.68% lower at .₹ 268.65 Wed­nes­day, in line with the broader Mum­bai mar­ket. The listed sub­sidiaries also closed al­most flat, or lower.

The merger is likely to re­sult in re­cur­ring sav­ings, es­ti­mated at more than .₹ 1,000 crore in the first year through a com­bi­na­tion of en­hanced op­er­a­tional ef­fi­ciency and re­duced cost of funds, the gov­ern­ment said.

“The merger will also lead to bet­ter man­age­ment of high-value credit ex­po­sures through fo­cussed mon­i­tor­ing and con­trol over cash flows, in­stead of sep­a­rate mon­i­tor­ing by six dif­fer­ent banks,” the state­ment said. Ex­ist­ing cus­tomers of sub­sidiary banks will ben­e­fit from ac­cess to SBI’s global net­work, it added.

GLOBAL PLAYER

Jait­ley said with this merger, SBI will be­come a large bank; in fact, a global player.

Ac­cord­ing to mar­ket es­ti­mates, af­ter the merger, SBI will have more than 50 crore cus­tomers and an as­set base of .₹ 37 lakh crore. A de­ci­sion on Bharatiya Mahila Bank will be taken later.

The merger plans will fol­low as ear­lier de­cided, the gov­ern­ment said. Ear­lier this month, SBI chair­man Bhat­tacharya had hinted that the merger might get de­layed.

“We were plan­ning to do it by March but again be­cause of de­mon­eti­saiton it will prob­a­bly mean a de­fer­ment of a quar­ter,” she had said. The gov­ern­ment had given her one-year ex­ten­sion amid the lender’s con­sol­i­da­tion with its as­so­ciate banks.

There has been no con­sol­i­da­tion among state-run banks since State Bank of In­dore was merged with SBI in 2010. SBI took over State Bank of Saurash­tra in 2008.

The merger of State Bank of In­dia with the as­so­ciates will min­imise vul­ner­a­bil­ity to any geo­graphic con­cen­tra­tion risks faced by the sub­sidiary banks, the gov­ern­ment said.

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