The State Bank of India (SBI) announced on Thursday approval of the merger of three of its associate banks and the Bharatiya Mahila Bank (BMB), with itself.
The central board of directors of SBI has accorded their approval to the scheme of acquisition of the State Bank of Bikaner & Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT) and Bharatiya Mahila Bank Limited (BMBL) by the State Bank of India. The proposal does not include merger of State Bank of Patiala (SBP) and State Bank of Hyderabad (SBH) with SBI.
Details of the scheme and swap ratios were disclosed to the stock exchanges.
Merger Approval From Union Cabinet:
The union cabinet had in June approved the proposal whereby State Bank of Bikaner and Jaipur (SBBJ), State Bank of Travancore (SBT), State Bank of Mysore (SBM), State Bank of Patiala and the State Bank of Hyderabad will merge with SBI. The Bharatiya Mahila Bank (BMB) will also be merged with SBI, as part of the move.
Key Points You Should Know about the Merger:
1) This is the first ever large-scale consolidation in the Indian banking industry.
2) The merger will create a banking behemoth with an asset book of Rs 37 lakh crore.
3) SBI will give 28 of its shares for every 10 shares held of State Bank of Bikaner and Jaipur.
4) It will give 22 of its shares for every 10 shares held of State Bank of Mysore.
5) The lender will give 22 of its own shares for every 10 shares held of State Bank of Travancore.
6) SBI will give 4,42,31,510 shares with face value of Re. 1 for every 100 crore equity shares of Bhartiya Mahila Bank.
7) The merger will see SBI’s ranking approve in the Bloomberg’s largest bank by asset ranking. It may well break through the 50-mark in the ranking.
8) SBI’s asset base will now be five times larger than the second-largest Indian bank, ICICI Bank.
Equity Shares with Associates:
Subject to final approvals from the Reserve Bank of India (RBI) and the government, the scheme provides for the following:
- 28 equity shares of Rs 1 each of SBI for every ten equity shares of Rs 10 each of SBBJ
- 22 equity shares of Rs 1 each of SBI for every ten equity shares of Rs 10 each of SBT
- 22 equity shares of Rs 1 each of SBI for every ten equity shares of Rs 10 each of SBM
- 4,42,31,510 equity shares of Rs 1 each of SBI for every 100 crore equity shares of Rs 10 each of BMB
SBI holds a 75 percent stake in SBBJ, 79 percent in SBT, 90 percent in SBM. The two other associate banks, SBP and SBH, are unlisted and where SBI holds a 100 percent stake.
SBI in Indian Banking System:
The SBI Group controls 22 per cent of the Indian banking system. The five associate banks have a market share 5.30 per cent in deposits and 5.33 per cent in advances. Their cumulative net profit was Rs 1, 368.7 crore at end of March.
SBI will face challenges in rationalising branches and in integrating employees from the associate banks. The bank will prepare a plan on rationalising the retail banking network. The SBI Group has 22,000 branches, of which SBI has 16,800.
Corporate finance branches of the associate banks will be absorbed by SBI because 60-70 per cent accounts are common.