Finance Minister Arun Jaitley on Monday said the Government is looking only at SBI merging 5 subsidiaries as well as Bharatiya Mahila Bank with itself and a decision on this will be taken soon.
“We are looking at SBI (proposal) at the moment. It is with the Government and (it) will respond. The Government’s policy by and large supports consolidation. I have indicated that in the budget itself,” he said after a meeting with the heads of public sector banks and financial institutions here.
“We are expecting (approval) shortly,” he said when asked as to how soon the Government nod is expected.
last month, SBI cleared proposal for merger of subsidiary banks and Bharatiya Mahila Bank. It sought Government’s approval for the merger.
The country’s largest lender has five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
Among these, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed.
The merger will create Rs 37-lakh crore banking behemoth with over 50 crore customers.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.
SBI has maintained since then that it would merge others as well but none of its moves fructified due to lack of capital (which was pegged at least Rs 2,000 crore each for per bank) and stiff opposition from employee unions.
The merged entity will create a banking behemoth, which can compete with the largest in the world, with an asset base of Rs 37 trillion (Rs 37 lakh crore) or over $555 billion, with 22,500 branches and 58,000 ATMs as of December 2015. SBI alone has close to 16,500 branches, including 191 foreign offices spread across 36 countries.
According to sources, a Cabinet note has been moved with regard to the merger of associate banks of SBI with itself. The merger proposal may be taken up by the Cabinet towards the end of this month.
Once the Government nod is given, the process of merger of associates would start.
Easier candidates for the merger are the unlisted entities -- State Bank of Patiala and State Bank of Hyderabad, sources added.
Besides, the listing of PSU general insurance companies is also on the anvil. There are four public sector general insurance companies -- New India Assurance Company ltd, National Insurance Company ltd, Oriental Insurance Co ltd, United India Insurance Co ltd.
Besides, there are two specialised insurers -- ECGC and AIC -- one life insurance insurer, lIC.
Finance Minister Arun Jaitley also said NPA-ridden public sector banks would be empowered and protected in case of “commercially prudent” settlement of bad debts.
With provisioning for NPAs or bad debts leading to Rs 18,000 crore of accumulated net loss for about a dozen banks, he said the Government will not hesitate to provide capital beyond the Rs 25,000 crore budgeted for the current fiscal.
After meeting top executives of state-run banks, Jaitley said the Indian Banks’ Association - a representative body of management of banking in India - would discuss and suggest a mechanism to handle settlements of non-performing assets (NPAs) or bad debts.
“The IBA would be examining some of the suggestions. The government would be also open for discussion...To the suggestions that the banks further put forward with regard to resolving the stress that has been created.
“One of the key considerations was that in situations like these banks should be empowered and consequently should be protected so that they can bring about commercially prudent settlements,” Jaitley said after the review meeting with the heads of public sector banks.
He said the PSBs clocked operational profit in excess of Rs 1.40 lakh crore last fiscal and the cumulative losses of Rs 18,000 crore suffered by them were mainly on account of higher provisioning for bad loans.
“The overall operational profit of the PSBs last year was quite significant. It was in excess of Rs 1.40 lakh crore... It is on account of the provisioning that overall the PSBs declared a net loss of about Rs 18,000 crore and a significant amount of provisioning having been made in the last two quarters (of last fiscal),” Jaitley said.