20-Mar-2017: Cabinet approves SBI merger with Bharatiya Mahila Bank

The Union Cabinet has approved the merger of Bharatiya Mahila Bank (BMB) with State Bank of India. BMB’s total business of Rs 2,000 crore and its 103 branches will be merged with SBI soon. The approval comes after last month’s Cabinet approval for the merger of SBI’s five associate banks with the larger entity, which will be effective from April 1.

The Finance Ministry said the SBI group already has 126 exclusive all-women branches across the country while the Bharatiya Mahila Bank (BMB) has only seven. The proportion of administrative and managerial cost in the BMB is much higher to reach the same coverage. For the same cost, a much higher volume of loans to women could be given through the SBI.

Although the addition of 103 branches of BMB and business of approximately Rs 2,000 crore would not make significant impact on the branch network and business levels of SBI, it will be ensured that the merger strengthens and reinforces SBI’s focus on financing of women entrepreneurs in order to fulfil the objectives behind setting up of Bharatiya Mahila Bank.

Along with the merger of the five associate banks with SBI, this merger constitutes an important step towards strengthening the Indian banking sector through consolidation of public sector banks.

15-Feb-2017: Cabinet approves acquisition of subsidiary banks of State Bank of India

The Union Cabinet has approved the acquisition by the State Bank of India of its subsidiary banks namely State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

The Cabinet also approved the introduction of a Bill in Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956.

The merger is likely to result in recurring savings, estimated at more than Rs. 1,000 crore in the first year, through a combination of enhanced operational efficiency and reduced cost of funds.  Existing customers of subsidiary banks will benefit from access to SBI’s global network.  The merger will also lead to better management of high value credit exposures through focused monitoring and control over cash flows instead of separate monitoring by six different banks.

The acquisition under Section 35 of the State Bank of India Act, 1955 will result in the creation of a stronger merged entity.  This will minimize vulnerability to any geographic concentration risks faced by subsidiary banks.  It will create improved operational efficiency and economies of scale.  It will also result in improved risk management and unified treasury operations.

The acquisition of subsidiary banks of State Bank is an important step towards strengthening the banking sector through consolidation of public sector banks.  It is in pursuance of the Indradhanush action plan of the Government and it is expected to strengthen the banking sector and improve its efficiency and profitability.