As the Government has set the ball rolling on consolidation process of some weak State-run banks into larger and stronger banks, country’s largest public sector bank State Bank of India (SBI) is not ready now for the merger either with its own associates or any other public sector banks (PSBs). The bank is working hard to firstly strengthen its capital and then it will go for it after examining various modes of consolidation process in the system.
“The Government’s proposal for merging weak PSBs with large bank is ideal for the banking industry but we are not in a hurry for the consolidation at present. What is the main objective of the bank is that we need to strengthen our capital first. We will go for it when the time is ripe,” a top SBI official told The Pioneer.
At a time when the Finance Ministry is working very hard to make around 10 capitally-sound and healthy big banks out of the total 27 public sector banks in the country, including the SBI associates, the country’s largest lender is not willing to go for it due to various reasons. It has already merged two of its associate banks in past - State Bank of Saurashtra and State Bank of Indore. Now the Government is eyeing its other five associate banks - State Bank of Mysore, State Bank of Hyderabad, State Bank of Travancore, State Bank of Patiala and State Bank of Bikaner and Jaipur to fall in its merger trap for making a better and greater bank.
On May 4, 2016, an email sent to SBI Chairman Arundhati Bhattacharya in this regard remained unanswered, but the official said, citing the reasons that why the SBI does not want the Government’s merger plan is because of mainly two important issues involved in its divisions like Human Resource (HR) and Information & Technology (IT).
“For IT sharing, SBI may not face any problem as we have more or less same software used by our associates. But, other than associates, it will be very difficult for the SBI to manage both HR and IT issues. As far as the HR issues are concerned, the problem lies in rank issues of employees at par with the SBI. For IT, the bank may face glitches in Core Banking System (CBS) where different vendors have to work in the same platform, creating chaos and confusions in the system,” he said.
“As the SBI and all other public sector banks, except its associate banks, have different structures in all aspects, the post-merger will demand to integrate them in a common platform which is the difficult task for the bank,” he added.
When enquired about the merger plan with other than SBI associates, he said, “Generally speaking, as per the SBI Act we cannot merge any other public sector banks with the SBI. Even if the Government does some cosmetic changes in the Act and nudges for consolidation, we will go for our associate banks, only after reviewing its balance sheet and performance as well, but certainly it is not going to happen soon,” he said.
In a move to tackle issues such as bad loans, capital infusion and bank consolidation in state-owned banks, the Finance Ministry’s recently-formed Banks Board Bureau, headed by former Comptroller and Auditor General Vinod Rai, expects that the merger of SBI group banks into one entity will create a suitable environment for consolidation among other public sector banks.
However, Rai recently said, “Though consolidation work in progress, it is secondary issue for us. Just now it is the question of trying to resolve the assets and trying to ensure any vacancies which exist get filled up so we are working towards that.”