Merger will lower operating costs for combined entity: SBI MD

New Delhi, Feb 16 (IANS) With the Union Cabinet granting approval to the merger into the State Bank of India (SBI) of its five associate banks, the public lender on Thursday said the combined entity would have lower management costs resulting in savings on operating costs.

“Once merger is complete, we will be in a position to save costs of these associate banks, because the structure of the five head offices will fold into one corporate office of the SBI. The zonal offices will also get integrated into our operations,” SBI Managing Director D.K. Khara told BTVi in an interview.

“Lesser management costs of these offices will get reflected in saving operating costs of banks. CASA (Current Account, Savings Account) will go up. Lots of cost efficiency and capital efficiency will come into play. It will save costs for banks, which will save resource cost and prove advantageous,” Khara said.

He said that though there are no plans to shut down branches, rationalisation of branches would take place — meaning dedicated branches for small and medium entreprise (SME) lending, servicing high net worth individuals (HNIs), among others.

“It will create much more value for customers,” he added.

The merged entity with the one-fourth of the market share would have a balance sheet of about Rs 40 lakh crore, 23,000 physical branches and 22,000 ATMs, Khara said.

Post-merger, a shareholder will get 28 shares of SBI for every 10 shares of State Bank of Bikaner and Jaipur (SBBJ).

The legal entity of the associate banks will cease to exist from the effective date of merger.

“From the effective date, the merger will come into effect. The data integration will start soon after that and in a month, we should be able to complete all the data integration,” he said.

The SBI MD said that the losses posted by the associate banks was transitory and a result of realigning of their asset classes with the SBI.

“The loss concerned in associate banks is more transitory in nature. It essentially happened when we tried to realign the asset classes of all associate banks with the SBI. All banks have significant operating profits… That’s not much of an issue,” he said.

“It was transitory two-quarter loss, because prior to that they never had such kind of losses. Once asset re-classification is complete, they will be back to normal,” he added.

The Cabinet on Wednesday approved the merger into SBI of its five subsidiaries, namely, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala.

The proposed merger of the Bhartiya Mahila Bank into the SBI is still under consideration.

Last year, the SBI had announced that it would merge its five subsidiaries and the Bharatiya Mahila Bank on getting government approval for the same.