Mumbai, Aug. 25: The State Bank of India (SBI) will merge its associate, the State Bank of Saurashtra, with itself. This is the first time that a subsidiary bank will be merged with the parent in the SBI family.
The other banks in the SBI group are the State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Travancore and the State Bank of Mysore.
The merger of associate banks with the SBI is in the air for quite sometime now. However, the bank did not take any step to amalgamate any of its subsidiaries with itself, though a “virtual merger’’ had taken place.
Senior SBI officials were not available for comment. Sources, however, said a proposal to merge the State Bank of Saurashtra with the SBI was okayed today at a board meeting.
They added that the bank would approach the Reserve Bank of India in the next few days for its approval.
The State Bank of Saurashtra has a strong presence in Gujarat. It has more than 450 branches. For the year ended March 31, 2007, its deposits were Rs 15,804 crore and advances over Rs 11,000 crore. On the other hand, SBI’s deposits were over Rs 4,00,000 crore and advances over Rs 3,00,000 crore. Hence, the combined business of both these banks will be nearly Rs 7,26,000 crore.
Last year, the State Bank of Saurashtra posted a nearly 45 per cent growth in net profit. The bank has a gross non-performing asset ratio of 1.15 per cent and a capital adequacy of nearly 13 per cent.
Banking analysts said the merger was a significant move as it could be a prelude to the amalgamation of other associate banks with the parent at a later stage. The SBI is looking to expand its presence in the country to take on foreign banks. The Reserve Bank of India had earlier said it would allow foreign banks to acquire private sector banks from 2009.
“It is not only the foreign banks with big pockets that are a threat to the SBI. Even banks such as ICICI Bank, which recently completed a massive follow-on offering, can pose a threat. The bank, therefore, wants to be bigger and mightier,” a banking analyst with a foreign brokerage said.
Finance minister P. Chidambaram had also said that nationalised banks should look at mergers among themselves after taking the employees into confidence.
SBI chairman . P. Bhatt had recently said a merger of the seven banks would enable the entity to possess the largest business volume compared with other nationalised banks put together.