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Cabinet clears merger of 5 associate banks with SBI


15 Feb, 2017 10:35p.m.

The Cabinet has approved the merger of five associate banks with the State Bank of India (SBI). 

The five associate banks are 
  1. State Bank of Bikaner and Jaipur
  2. State Bank of Hyderabad
  3. State Bank of Mysore
  4. State Bank of Patiala
  5. State Bank of Travancore
The merger does not include Bharatiya Mahila Bank. 

The merger will create a bank with an asset book of Rs 37 lakh crore. SBI’s asset base will now be five times larger than its nearest rival ICICI Bank. After the merger, SBI will have 22,500 branches, 58,000 automated teller machines and over 500 million customers. The five associate banks had a market share of 5.30 per cent in deposits and 5.33 per cent in advances on March 31, 2016. Their net profit stood at Rs 1,640 crore at that time.

Finance Minister Arun Jaitley said after a Cabinet meeting on Wednesday the merger would lead to a synergy in operations and lower State Bank of India’s cost of funds. An official statement said the savings would be over Rs 1,000 crore in the first year.

The minister assured the employees of the banks concerned that the merger would not be detrimental to their terms of service.

SBI had cleared the proposal for the merger last May. In June, the Cabinet approved the merger in principle. The proposal then went to the respective bank boards before returning to the Cabinet for a final approval.

According to initial plans, SBI will offer 28 of its shares for every 10 shares held of State Bank of Bikaner. It will offer 22 of its shares each for every 10 shares held of State Bank of Mysore and State Bank of Travancore.

In earlier rounds of consolidation, State Bank of Saurashtra and State Bank of Indore had merged with State Bank of India in 2008 and 2010, respectively.

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