SBI stirred the hornet’s nest when it announced late Tuesday that its board has discussed a proposal to merge 5 associate banks with itself. Fears of job cuts and an unwieldy wage and pension bill were thrown up as reasons the merger wont work. SBI managing director and group executive (associates and subsidiaries) V G Kannan played down the concerns, clearly stipulating that there will be no job losses. Excerpts from the interview:
Now that you have initiated the move, what factors will you consider?
One is rationalisation of branches and the cost structure in terms of HR. There is difference in the way wages are structured. We will have to have a dialogue as they (the employees) cannot have best of both worlds. So we will have to come somewhere midway and take a call. Many of them will get a huge lump-sum right now, while some may have the option to take it in future …so there are various options.
Who will benefit and how will it look like?
It will depend on the grade of the officer, how ambitious they are, etc…There is slightly different structure in us (SBI) and them (associate banks). In the associates, all employees draw 50% of their last drawn salaries as pension. They also have service gratuity linked to the number of years they have serviced. They do not get provident fund i.e. their bank does not contribute for the PF of the employees. Up to scale 3 or so, pension is 50%, while above it is 40% of the last drawn salary. We have a cap on gratuity and we have a contribution to provident fund. So it is not a straight-jacket structure. Everyone may not get everything. But there are positives in both.
There is resistance from the unions and they have planned a strike?
We have mentioned we do not contemplate any loss of jobs. Even in the previous two mergers, we did not have. There is no question of any risk and these are unnecessary fears. Average recruitments are 15,000 every year, so we will just end up recruiting less people. Net it will be win-win for all employees.
What about duplication of operations? What will happen to the staff there?
Every year, we also have 15,000 people retiring, so over a period of time, the redundancy will be absorbed over a period of 2 years. We would not have any infringement on that front.
A merger of such scale would have challenges…
We expect challenges mainly in HR as there will be lot of discussions. Essentially, we have to discuss with the employee unions and the challenge will be in re-organisation of circles. Because of the huge numbers that will come in, we expect to add about 4-5 circles from existing 14 circles. We also have to rationalize operations of 20% of the branches which are far-away from the corporate centre.
How will you look at the asset quality aspect of the associates?
Largely, everything is system driven and there is no different system of operations. On the corporate front, we are aware of corporate advances and the large lenders, so we are well aware of the situation. So, it is not completely unknown to us.
What about the local business of the associates?
People had similar apprehensions even earlier when we merged the State Bank of Saurashtra. Almost lock, stock, and barrel of the customers have moved to SBI and they are very much satisfied as they have larger amount sanctioned and in a position to get more credit too.
What will be your balance sheet size post the merger?
It will increase to Rs 37 lakh crore (from the current Rs 28 lakh crore).
What about the real estate value you would get from the merger?
It is valued at about Rs 3,500 to 5000 crore, this is a ballpark valuation.