Cabinet approves merger of 5 associate banks with SBI, stocks surge

The Union Cabinet on Wednesday approved the merger of 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 as well as Bharatiya Mahila Bank with State Bank of India, according to TV reports.Last month, SBI cleared proposal for merger of subsidiary banks and Bharatiya Mahila Bank.

Arundhati Bhattacharya, chairman, SBI said, “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 rationalisation 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.”

Welcoming the move, State Bank of Travancore MD CR Sasikumar told CNBC TV that it will be a great benefit to the customer. He further added that he doesn’t see any issues on staff integration.

Among the 5 banks, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed.

Shares of State Bank of Mysore closed 20 per cent up at Rs 547.90. State Bank of Travancore and State Bank of Bikaner and Jaipur settled 19.99 per cent up each at Rs 478.90 and Rs 599.60, respectively. Shares of State Bank of India surged 3.90 per cent to Rs 215.65, whereas the BSE Bankex index advanced 1.38 per cent to 20,525.10.

The merger will create Rs 37-lakh crore banking behemoth with over 50 crore customers.

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 others as well but none of its moves fructified due to lack of capital (which was pegged at least Rs 2,000 crore each for per bank) and stiff opposition from employee unions.

Courtesy The Financial Express