State Bank of India (SBI) is set to be among top 50 banks in the world after the government approved the proposal to merge five associate banks with it by end of March next year. Currently, no Indian bank features in the list of top 50 global banks.
SBI, India’s largest bank, has five associate banks — State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT).
The government has also proposed to merge the all-women Bharatiya Mahila Bank (BMB), a bank for women set up in 2013.
According to the merger scheme announced on Thursday, a shareholder will get 28 shares of SBI for every 10 shares in SBBJ and 22 shares of SBI for every 10 shares held in SBM/SBT. The remaining two subsidiaries are not listed.
For a merger with BMB, the swap ratio has been set at 4,42,31,510 shares of for every 100 crore shares of BMB.
The merged entity will create a banking behemoth, one-fourth of market share in India’s banking sector (in terms of loans and deposits), with an asset base of Rs 37 lakh crore from Rs 22.59 lakh crore.
This is one-fifth the size of India’s gross domestic product (GDP) and more than five times the balance sheet size of ICICI Bank, largest private lender in the country.
The merger will also boost the number of employees by further 64,000 employees of the subsidiaries making total employee strength of nearly 2.70 lakh from 2.05 lakh people across 23,000 branches. At present, SBI has about 16,800 branches, including 198 foreign offices spread across 36 countries, and over 59,035 ATMs.
Analysts say, the key challenge for SBI will be to integrate human resources and rationalise branch network and operations. However, the short-term negatives will be more than offset by long-term positives.
After the announcement on August 18, shares of parent SBI on Bombay Stock Exchange ended higher by 4.15% to end at Rs 258.50 per share on Friday.
SBBJ shares were up 1.47% at Rs 683.20; SBT shares jumped 6.17% at Rs 537.05 while SBM ended weaker by 12.09% at Rs 546.55 per share at day’s close.