Cabinet approves SBI's merger plans

New Delhi: Union Cabinet under Prime Minister Narendra Modi on Wednesday gave a go-ahead to the merger plan of SBI and its five associate banks to create a global sized bank.

With the merger of all the five associates, SBI is expected to become a global-sized bank with an asset base of Rs 37 trillion (Rs 37 lakh crore) or over $555 billion, 22,500 branches and 58,000 ATMs. It will have over 50 crore customers.

“The Cabinet had earlier in-principle cleared the (merger) proposal. It had gone to the boards of various banks which have granted the approvals. The recommendations of the boards were considered today and the Cabinet cleared the proposal,” said Finance minister Arun Jaitley. He added that the merger will not be detrimental to the services of any employee, “It will be a smooth arrangement.”

The associate banks which will be merged with SBI are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. The Cabinet also approved the introduction of a bill in the Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956.

“With this merger, the SBI, with all these five subsidiaries merging in it, will also become a very large bank, not merely from a domestic point of view but actually a global player in its very size,” said Mr Jaitley.

On the proposal to merge Bharatiya Mahila Bank with SBI, the finance minister said, “It is under consideration as of now. We have not taken any decision related with that today.”

SBI has about 16,500 branches, including 191 foreign offices spread across 36 countries. SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it.

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.