‘SBI merger will help cut costs, improve productivity’

State Bank of India’s Board has cleared the deck for the mega merger of five associate banks and Bharatiya Mahila Bank with the country’s largest lender. The bank now requires approval from the RBI and the government. Speaking to BTVI , SBI MD Rajnish Kumar says the intention is to complete the entire merger process by this fiscal year. While ruling out large-scale lay-off, Kumar outlined the need to improve productivity, business and profit-per-employee. With SBI undergoing a digital transformation, the bank expects to bring down the cost-to-income ratio. Maybe in the next two years, the benefits of synergies will emerge, he says. Excerpts:

What are the next procedural steps to be taken to complete the mega merger? What is the timeline for completing all the procedures and the merger?

Procedurally, we have worked out the share-swap ratio between SBI and all the associate banks and Bharatiya Mahila Bank. And in respect of the three associate banks, which are listed on the stock exchanges, there is a process; and a shareholders grievance committee has been constituted. If minority shareholders have any grievances, they can take it up with the committee. And once a decision has been taken and everything is clear, then application will be made to the RBI. Once the RBI approves it, the matter will go to the Centre. And 30 days after the government notifies, it becomes the effective date of the merger.

When do you envision the SBI and the associates to be legally and technically a merged unit?

The intent is to complete the entire process within this fiscal.

Has there been an internal discussion or requirement to approach the Competition Commission of India?

No, it is not required to approach the CCI because the rules governing SBI and the associate banks are defended and have been looked into.

Do you have any numbers on how many staff attrition needs to done, how many branches and ATMs need to be closed after the merger because of redundancies?

The specific numbers are still a work in progress. There is no question of closing down ATMs and branches. But optimisation will definitely take place. For example, there are 5-6 branches in the same building in some locations. So that type of optimisation is definitely going to happen.

Similar is the case for administrative offices and local head offices. There will be savings on account of less people required. But the attrition will happen in a normal course because every year 13,000 people retire. And how much we need to replace will depend on the synergies from the merger.

We are investing a lot of money on digitisation of many processes. So we would like to enhance the productivity of the employees in terms of business per employee and profit per employee. So the merger will bring the added benefits over time. Maybe in the next two years, the benefits of synergies will emerge. And the fact that the bank is undergoing a digital transformation will also help in bringing down the cost-to-income ratio.

Will branches be closed or employees laid off?

There might be some branch closures. But we open many branches every year and we have a branch expansion plan. We have a 3-year branch expansion plan and optimisation in terms of old and existing locations. Our share in branch network of all scheduled commercial banks is 15-16 per cent. So SBI would like to maintain that share.

Another thing is, the way we service clients through the traditional brick-and-mortar branches are also undergoing a change. Now there is a lot of technology through which customers can be approached. The overall strategy will be that no customer, either of SBI or associate banks, should be in inconvenience after the merger. Similarly for the staff, lay-offs are not necessary. But overall we are serious about optimisation and productivity gain.

Was there ever a discussion that one or two associate banks may be spun into a separate entity rather than merge all of them with SBI?

Academically, one discussion point was that merge all the 5 associate banks and create a separate bank. In today’s competitive market, unless a competitive advantage is created for an entity, it is difficult to survive. There are regulatory and capital requirements; and competition in the market is intense. If you are just a clone of one bank, it will not work. Many banks are finding it difficult to survive. It is the question of size, economics, scale and capability to invest in latest technology, which requires huge investment. I think after all the academic discussions, the merger was considered to be the best option in the interest of the banking industry and the country as a whole.