Five SBI associates may merge into a new state bank

A meeting of the boards of the five associated banks of State Bank of India in Mumbai today is expected to set in motion a proposal for consolidation outside SBI, reports say.

The five associate banks - State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore, State Bank of Bikaner and Jaipur and State Bank of Patiala – could merge to form a rival to SBI.

The All India Bank Employees' Association (AIBEA) is pressing for a merger of the five banks instead of SBI annexing its smaller affiliates and finance minister Arun Jaitley too is reported to be in favour of such a move, union officials said on Saturday.

In fact, AIEBA general secretary C H Venkatachalam said the union has called for a strike on 7 June and 28 July this year to press for the merger demand.

"Though on principle we are against consolidation in the banking industry, in the case of five associate banks, we prefer the same instead of each one merging into SBI," Venkatachalam said.

"Union finance minister Arun Jaitley also opined that the five associate banks of SBI could be merged into one thereby creating a strong entity," an IANS report quoted Venkatachalam as saying.

State Bank of Hyderabad is the leader of the pack with deposits of Rs1,39,300 crore and advances of Rs1,14,000 crore, with State Bank of Mysore taking the fifth place with deposits of Rs70,200 crore and advances of Rs55,400 crore.

Together these five state-run banks account for consolidated deposits of Rs5,09,000 crore and advances of Rs3,97,000 crore, sufficient to be categorised as a major bank in the Indian context.

Although today's meeting has not listed any specific proposal relating to merger or consolidation on the agenda, reports say the respective boards will discuss this issue along with other important topics such as non-performing assets and other asset quality issues.

Two of the seven associate banks - State Bank of Indore and State Bank of Saurashtra - were merged with SBI in 2010 and 2008 respectively during the United Progressive Alliance (UPA) regime.

While a section of banking industry and experts feel there is a need for merging some of the public sector banks, which are very small when compared to their global peers, the thinking in certain quarters is that India needs stronger, not bigger, banks.

SBI, India's largest commercial bank, is still not among the top 50 banks in the world. It is ranked only 67th among its global peers.