(MENAFN- Khaleej Times) The first ever large-scale merger in the Indian banking industry, which will position the country's largest lender State Bank of India (SBI) among the top 50 global banks with assets valued at $550 billion, will see the banking giant expanding and consolidating its operations in the GCC.
Following the merger of SBI's five associate banks and a women's bank, which is to be completed before 2016-17 financial year, the bank will restructure its UAE operations by relocating one of the two representative offices from Dubai to Abu Dhabi. The bank also seeks to open a rep office in Doha.
SBI already has one branch in Muscat, two in Bahrain and one in Jeddah.
The merger of State Banks of Bikaner & Jaipur (SBBJ), Travancore (SBT), Patiala (SBP), Hyderabad (SBH) and Mysore (SBM), and also of Bhartiya Mahila Bank with SBI will lead to a 27 per cent or $120 billion jump in the lender's total assets to $550 billion - roughly one fifth of India's gross domestic product - accounting for 22 per cent market share with around 25,000 branches. The combined entity will have 2,70,000 employees and 58,000 ATMs serving over 500 million customers, said C.R. Sasikumar, managing director of SBT. Speaking at a media briefing, Sasikumar said while the amalgamation would catapult SBI into the top 50 banks worldwide, NRI customers would benefit from SBI's wider reach in India and abroad. Also present at the event were Santanu Mukherjee, managing director of SSBH; Pradeep Kumar Mishra, general manager, SBI NRI Services; Ajithkumar T.P, SBT's chief representative officer in the GCC; M. Ravi, general manager of SBT-managed City Exchange, and Ramana Rao, chief general manager of SBI.
Sasikumar said post merger, customer deposit accounts with the associate banks would continue on contracted interest rate till maturity while loan accounts would continue on contracted interest rate till maturity or review, whichever is earlier.
In the case of a few customers, account number swill be changed and they will be informed in due course while existing cheques and debit cards will continue to be valid for a specified period.He said under the share swap agreement cleared by SBI board, SBT shareholders would get 22 shares of SBI for every 10 shares (having a face value of Rs10).
Mukherjee said the merger deal involves allotting 28 shares of SBI (having face value Re 1) for every 10 shares (having a face value of Rs 10) in State Bank of Bikaner and Jaipur (SBBJ) and 22 shares of SBI for every 10 shares (having a face value of Rs 10) held in State Bank of Mysore. The merger is expected to involve rationalisation and merger of branches but there will be no job losses. All the employees will be absorbed in the merged entity.
The merger process, seen by most financial analysts as a win-win scenario for both SBI and its associate banks, has been facing legal suits and resistance from some quarters amid concerns raised with regard to a steep rise in bad loans recorded by the associate banks in recent months. Pro-merger analysts argue that through the amalgamation, the SBI would get the benefit of efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base.
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Issac John Associate Business Editor of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.
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