synergy search Unlisted subsidiaries are State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala and State Bank of Saurashtra. Govt may allow the three listed subsidiaries to remain standalone entities Merger with unlisted arms will create a larger SBI, giving the bank more financial muscle

New Delhi, March 18: The government plans to merge the State Bank of India with its four unlisted subsidiaries — State Bank of Hyderabad, State Bank of Indore, State Bank of Patiala and State Bank of Saurashtra.

The government may merge these banks into SBI, allowing the listed subsidiaries, State Bank of Bikaner & Jaipur, State Bank of Travancore and State Bank of Mysore, to remain standalone entities. The government has been looking at the possibility of either merging SBI’s subsidiaries with it or creating SBI-II by merging the seven subsidiaries into a separate bank.

While it was felt that the first option would create a huge unwieldy monolith, the second was not favoured by SBI as it would create a rival from its own subsidiaries. Officials are now considering merging the smaller unlisted subsidiaries, which are almost 100 per cent owned by SBI. This will create a larger SBI, giving the bank much more financial muscle.

India has to open up its banking sector further to foreign players within the next few years. “We need to strengthen our own banking sector to be able to take on competition from the foreign players who would be entering the country in a bigger way,” officials said.

Unions are expected to oppose the move as it could involve branch rationalisation and relocation of employees. “Nothing can be done without taking the workers on board as there are political sensitivities involved,” officials said.

However, officials said innovative ways could be worked out to keep workers in the same town or district. Officials said SBI has already started taking steps towards an eventual merger. It has integrated its technology platform with its associate banks.

The bank has put in place a common IT and ATM network and an accounting system, which would enable a smoother merger of associate banks with SBI once it receives a formal approval from the government.

SBI owns 100 per cent of three of its unlisted subsidiaries. In State Bank of Indore, it has a 99 per cent stake.

The actual merger, however, would require amendments to the SBI (Subsidiary Banks) Act, 1959, the SBI Act and approval from each of the seven states of the associate banks.

SBI has a market share of 19 per cent ,while the group of seven associate banks has a market share of 25 per cent in deposits and advances.