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In addition to SBS, the other associates of SBI were the unlisted State Bank of
Hyderabad (SBH), State Bank of Patiala (SBP), and State Bank of Indore, and the
listed State Bank of Mysore (SBM), State Bank of Travancore, and State Bank of
Bikaner and Jaipur. Analysts said that if all seven associate banks were merged
with SBI, the consolidated entity’s asset size would be more than double that of
ICICI Bank, its closest competitor. Its deposit base would increase by 46%,
advances by 44%, and net worth by 37%.
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SBI’s total balance sheet size would be worth over
US$ 200 billion, enabling it to compete effectively with global banking
giants in the domestic as well as the international market, they said.6
Subsequent to its merger with SBS, SBI was expected to have better
valuation as the valuation ratios of its subsidiary were much better
than its own. SBI’s balance sheet would increase by Rs 1,900 million,
deposits by Rs 1,587.1 million, and advances by Rs 1,116.2 million. In
contrast, its closest competitor, ICICI Bank, added over Rs 6,500
million of deposits and Rs 4,900 million of advances in 2006–07.7
Several analysts felt that a virtual merger between SBI and its
associates had already happened in the past couple of years: adoption of
a common technology platform across all associates and SBI; adoption of
similar business and risk management policies; consolidation and
unifying of the ATM network within the SBI family of banks; integration
of the treasuries of all the associates in Mumbai; subsidiaries’ targets
and performance already figuring on a consolidated basis in SBI’s
balance sheet, etc.
According to them, what was needed was an effective merger of all
associates with the parent bank, which entailed shutting down of
redundant branches, laying-off of excess employees, and rationalization
of operations, all of which were quite difficult in the public sector
framework.
What could be realistically expected was an improvement in SBI’s loan
position – all subsidiaries had lower non-performing assets as a
percentage of advances – and closure of their regional and head offices,
they said.
SBI’s initiatives to consolidate had already run into rough weather. The
operationalization of the merger with SBS as well as the crucial board
meeting of the other six associate banks of SBI to give a formal nod to
their merger with the parent bank – both slated for January 2008 – had
to be put on hold as bank unions and officers’ associations opposed the
merger soon after the August 2007 announcement.
Around 35,000 employees of the associate banks observed a one-day strike
on September 27, 2007. In early December, 4880 branches of SBI associate
banks resorted to strike action all over the country.
According to the General Secretary of the All India Bank Employees
Association (AIBEA) and convenor of the United Forum of Bank Unions8
(UFBU), C.H. Venkatachalam, the merger of the associates with SBI “would
only lead to a monolithic bank that would slowly shed its social
responsibility. Only big corporates will benefit and not the common man.
It would lead to branch as well as employee rationalization.”9
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6] “SBI Looking to Add an ICICI Bank to its Kitty,”
www.labnol.org/india/corporate/sbi-looking-to-add-an-icici-bank-to-its-kitty/1257/
7] D. Murali, “Why Did SBI pick up State Bank of
Saurashtra to Kick Off Consolidation,” www.thehindubusinessline.com, August 30,
2007.
8] United Forum of Bank Unions is an umbrella
organization of nine national level bank unions in India.
9] K.R. Srivats, “Unions Oppose State Bank of
Saurashtra Merger with SBI,”
www.thehindubusinessline.com, September 9, 2007.
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