MERGER

State Bank to merge two more siblings
JAYANTA ROY CHOWDHURY

Coming closer
New Delhi, Oct. 13: The finance ministry wants the State Bank of India to merge two more unlisted subsidiaries with itself, after completing the exercise with the State Bank of Indore by end-December.
India’s No. 1 bank will consider similar deals with its three listed subsidiaries later.
The SBI, which has already merged the State Bank of Saurashtra with itself, is likely to merge the State Bank of Hyderabad and the State Bank of Patiala within 2009-10, officials said. These three banks — Indore, Hyderabad and Patiala — are unlisted. Post-merger, the SBI’s market share will rise from 19 per cent to about 25 per cent.
At a later stage, it will consider merging listed subsidiaries the State Bank of Bikaner & Jaipur, State Bank of Travancore and State Bank of Mysore. However, as this is a long-drawn procedure, the SBI will take stock of the situation at a later date.
Officials said a one-time merger would have been complicated and difficult to accomplish, which is why the process had been staggered.
The State Bank of Indore is the smallest bank in terms of capital, reserves, deposits and borrowings at Rs 33,075 crore and will be the first to be merged. The State Bank of Hyderabad has about Rs 76,721 crore in capital, reserves, deposits and borrowings, while the State Bank of Patiala has about Rs 59,060 crore.
All the state bank subsidiaries were formerly the central bank of various Indian princely states.
After these princely states were dismantled, these central banks, or treasuries, were turned into the subsidiaries of the SBI.
The need to add to the SBI’s size stems from the possible opening up of the banking sector to foreign competition in the next few years.
The finance ministry wants to create larger state-run entities to rival the global giants.
However, there are apprehensions of the SBI turning into an unwieldy entity if amalgamations took place vis-à-vis both unlisted and the listed entities.
Merging unlisted subsidiaries is seen as an easier option.