Union Cabinet approves merger 5 associate banks with SBI

On February 15, 2017 Union Cabinet chaired by the Prime Minister Narendra Modi has approved the merger of State Bank of India (SBI) with five of its associate/subsidiary banks. These five subsidiary banks are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. The Union Cabinet also approved the introduction of a Bill in Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956. The merger proposal was announced in May 2016 and was scheduled for March 2017. While announcing the decision, Finance Minister Arun Jaitley said that the Cabinet had earlier given its in-principle approval for the merger, and then had sent it to the respective banks for their suggestions. These suggestions have been taken on-board, and the decision has been formally approved by the Cabinet. The acquisition under Section 35 of the SBI Act, 1955 will result in the creation of a stronger merged entity. It will minimize vulnerability faced by subsidiary banks to any geographic concentration risks. It will improve operational efficiency and economies of scale resulting into in improved risk management and unified treasury operations. Existing customers of associate banks will benefit from SBI’s global network. The merger will lead to better management of high value credit exposures through focused monitoring and control over cash flows rather than separate monitoring by six different banks. The merger will also result in recurring savings, estimated at more than Rs. 1,000 crore in first year, because of reduced cost of funds and enhanced operational efficiency. The merger will boost the number of employees by further 64,000 employees of the subsidiaries making total employee strength of nearly 2.70 lakh from 2 lakh people across 23,000 branches. At present, SBI has about 18,000 branches, including 200 foreign offices spread across 36 countries, and about 62,900 ATMs.

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