“While the decision is purely exploratory at this stage and there is no certainty in relation to our completing the acquisitions, the bank, as a matter of good corporate governance to ensure complete transparency, is intimating this decision”.
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After over five years, associate banks of SBI, including State Bank of Bikaner and Jaipur, have proposed to merge with the parent lender.
However without any prior intimation or notice a table agenda was brought in the board meeting at the dictates of SBI to close down the associate banks and acquire the same by SBI.
In a statement, State Bank of Bikaner and Jaipur said that in-principle approval of the Board accorded to enter into negotiation with SBI for acquisition of its business.
Meanwhile, a section of employee unions have registered protest against any such move and threatened to go on a strike if such a move is approved by the SBI and the government. She further noted that the five associates are sitting on Rs 4,000 crore of fixed assets, which will add to the core capital under the new RBI norms. Now the NDA Government is trying to merge this bank with some bigger bank to strengthen its capital holding.
Although today’s meeting has not listed any specific proposal relating to merger or consolidation on the agenda, reports say the respective boards will discuss this issue along with other important topics such as non-performing assets and other asset quality issues.
The All India Bank Employees’ Association (AIBEA) has called a strike on May 20.
According to domestic brokerage Religare, SBI’s pre-tax profit may take a 15 per cent hit because of higher employee costs on account of the proposed merger.
Recently, Minister of State for Finance Jayant Sinha said in a written reply to the Rajya Sabha that any merger initiative has to come from the Board of the banks concerned, and the Government’s role is that of a facilitator.
SBI has already merged State Bank of Saurashtra and State Bank of Indore with itself in the last decade.
A Forced Merger — Clearly, this is a forced merger by the government, which is pushing for consolidation in the public sector banking space.
For the December quarter SBI reported a net income of Rs 1,115 crore, down 61.67 per cent from a year ago, while most of the associates also reported massive drop in net due to the rising bad loan issues.
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After IDBI Bank sold 2 per cent stake in the NSE in March 2016, one more shareholder – State Bank of India – is planning to disinvest up to 5 per cent of its equity stake in the exchange.
