The five associate banks of SBI and Bharatiya Mahila Bank are headed for a merger. The five SBI entities include State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. This will lead to the creation of a wealth management giant with more than 50 crore customers handling a capital of Rs 37 lakh crore. This is not the first time a merger has taken place SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged. The move was necessitated to create a state entity that could compete globally in a time when the Indian Economy is in the resurgence mode.
When it comes to the matter of approvals the government is yet to respond but given the fact that the government’s policy by and large supports consolidation it shouldn’t be a big deal, Finance Minister Arun Jaitley had stated pro consolidation policies and this is also seen as an effort which will enable banks to tackle NPA’s effectively. According to Fitch Ratings too, a consolidated banking structure would be “a positive development” in the long term for the banking system and that consolidation coupled with higher capital needs and governance reforms “would position the banking system better in support of a more open and higher-growth economy”.
