The proposed creation of Telangana State has thrown a spanner in State Bank of India’s plans for merger of its largest associate, State Bank of Hyderabad, with itself.
SBI Chairman Pratip Chaudhury had earlier indicated that a decision on merging one of its associate banks would be taken after July.
“An internal committee to evaluate the possible candidate for merger has been appointed and it is expected to submit its report anytime now,” a top executive of SBI told
Top performer
The merger of State Bank of Hyderabad (SBH), which tops the five associate banks in performance, with its parent has been under active consideration for long.
As it is 100 per cent owned by SBI along with State Bank of Patiala, the merger process would be easier and would not involve any share acquisition from outside.
“However, Telangana State will change the operational dynamics of SBI in terms of branches and overlapping which needs to be looked into.
“Hence, SBH would miss the chances of merger this time,” the executive said.
Harshavardhan, General Secretary of SBH staff association and Associate Banks’ employee association, also hinted that the merger could be delayed.
When asked on the SBH staff reaction, he said, “There are multiple angles to this. Our support to merger anytime would depend on what SBI is ready to offer to the employees.”
PARAMETERS
The general parameters to be considered for merger are advantage in the branch location/number and higher percentage of controlling stake, among others.
SBI’s stake in five associate banks now ranges from 75 per cent to 100 per cent.
The bank now is likely to consider merger of either State Bank of Patiala (SBP) or State Bank of Bikaner and Jaipur (SBBJ) which has limited shares under public holding, if it puts off SBH merger for now.
A 100 per cent stake in SBP and absence of local head office for SBI in Rajasthan might work in favour of the merger.
Further, according to sources, the Finance Ministry appears to be now tilted towards a merger with SBBJ.
Though the final outcome remains to be seen, Telangana State has, for the time being, deprived SBI of an easy target for merger. All indications are that it is going to be on the back-burner for sometime.