It was proposed over a decade ago that the State Bank of India (SBI) should merge 5 of its associate banks – State Banks of Bikaner and Jaipur, Hyderabad, Mysore, Patiala and Travancore. Now it has been done. The new bank, Bharatiya Mahila Bank has been added to the five. The giant combine will have a customer base of 37 crore, a branch network of almost 24 thousand and 59 thousand ATMs. Its deposit base will exceed Rs 26 lakh crore and its loan portfolio will be Rs 18.5 lakh crore. The merger is expected to lead to improved operational synergies, higher productivity, mitigation of geographical risks and rationalization of operational cost. Profits will also be up. Access to associate banks will be facilitated. The Bharatiya Mahila Bank will have a higher capital base.
The snag will lie in management integration among a staff of 2,70,011 which will include 69,191 employees from the associate banks now merged. The government will have to meet the challenge of achieving consolidation in the Indian banking sector. Too many banks can spoil operations. The government will of course have to control state-owned banks but it will have to decide how far their governance will be autonomous. Lenders will have to learn how to be professional. It is only then that the government banks will be able to compete with those in the private sector. Previously the stranglehold of the government on state banks led to inadequate return on investment. As a result of the merger, the SBI will be among 45 top global banks in assets and will put China behind.
