State Banks’ Merger to be Ef­fec­tive from April 1

Af­ter the merger of five as­so­ciate banks with it­self, SBI will ac­count for nearly a quar­ter of all out­stand­ing loans in the coun­try

The Economic Times - - Economy: Macro, Micro & More - Our Bureau

New Delhi: The merger of State Bank of In­dia’s five as­so­ciate banks with the par­ent will be­come ef­fec­tive in the new fis­cal year, the gov­ern­ment said.

In gazette no­ti­fi­ca­tions pub­lished on Thurs­day, the gov­ern­ment said the en­tire un­der­tak­ings of these five banks shall stand trans­ferred to and vested in State Bank of In­dia from April 1, 2017. Sep­a­rately, SBI in­formed stock ex­changes about the ef­fec­tive date of the merger.

The Union Cab­i­net ear­lier this month ap­proved the merger of State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Tra­van­core, State Bank of Pa­tiala and State Bank of Hy­der­abad with SBI.

The merger will cre­ate a big­ger SBI that will ac­count for nearly a quar­ter of all out­stand­ing loans in the coun­try. The com­bined en­tity will have a net­work of nearly 23,000 branches, fur­ther in­creas­ing the dom­i­nance of the coun­try’s largest bank.

Two of the five as­so­ciate banks, State Bank of Pa­tiala and State Bank of Hy­der­abad, are un­listed. Among the listed ones, SBI holds a 75% stake in State Bank of Bikaner & Jaipur, 90% in State Bank of Mysore and 79% in State Bank of Tra­van­core.

The gov­ern­ment had ear­lier said the SBI-as­so­ciate merger was an im­por­tant step to­wards strength­en­ing the bank­ing sec­tor through con­sol­i­da­tion of pub­lic sec­tor banks.

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 had ear­lier said.

SBI’s shares closed 0.5% lower at ₹ 270.50 Thurs­day, on a day when the Bom­bay Stock Ex­change gained 0.1%. The listed sub­sidiaries closed al­most flat, or lower. Of­fi­cers and em­ploy­ees of the as­so­ciate banks, with the ex­cep­tion of board mem­bers and ex­ec­u­tive trustees, will be­come em­ploy­ees of SBI af­ter the merger.

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