New Delhi, Aug. 24: The finance ministry wants the State Bank of India to merge more subsidiaries with itself next year.
India’s No. 1 bank will bring the State Bank of Indore into its fold this week. Earlier, the SBI had merged the State Bank of Saurashtra with itself, and is considering similar moves for the State Bank of Hyderabad and the State Bank of Patiala over the next few years, officials said. The SBI’s market share could go up to 25 per cent from 19 per cent if the unlisted Hyderabad and Patiala are merged.
At a later stage, it may even merge the listed associates — the State Bank of Bikaner & Jaipur, State Bank of Travancore and State Bank of Mysore — with itself. According to officials, the consolidation is possibly staggered because a one-time merger is complicated and difficult to accomplish.
The State Bank of Indore is the smallest in terms of capital, reserves and deposits and is, therefore, getting merged early. All the SBI siblings were formerly the central banks of princely states. They became SBI subsidiaries once the government integrated these states with itself.
The SBI needs to grow through such mergers so that it can compete with foreign banks when the government opens up the sector in a bigger way.
The finance ministry has been pushing for mergers among PSU banks to create larger and more efficient entities.
A merger with all its subsidiaries would turn the SBI into a bloated outfit, though its market share would have shot up to 37 per cent. A better option is to merge the unlisted subsidiaries.
The SBI had already integrated its technology platform with its associates which, the officials said, was a step towards merger. The bank has put in place a common IT and ATM network and an accounting system.
Shares soar
Shares of the State Bank of Mysore, Travancore and Bikaner & Jaipur today rallied as much as 20 per cent on the BSE, following the merger of the SBI Indore.
Extending yesterday's rally, the State Bank of Mysore soared 20 per cent to Rs 1,327.10, hitting an upper circuit. In two straight trading sessions, the scrip has registered a gain of 40 per cent.
