NEW DELHI,OOMMEN A. NINAN:State Bank of Travancore (SBT),the only public sector bank head-quartered in Kerala, was established in 1945 as the Travancore Bank Ltd. It became a subsidiary of State Bank of India (SBI) under the SBI Subsidiary Banks Act, 1959, enacted by the Parliament. Its newly appointed Managing Director C.R. Sasikumar spoke on the benefits of the proposed merger of the five subsidiaries, including SBT, with SBI.
What is the rationale behind the merger of SBI’s subsidiaries with the parent?
It is generally accepted that the multiplicity of about 27 Banks in the Public sector, which contributed to the growth of the economy from the ‘70s has not been able maintain the growth trajectory in recent times. Despite having many Banks in the Top 1000 Banks in the world, none of the Indian Banks is in the Top 50 Banks of the world.
As part of larger plan orchestrated by the government, the acquisition of Associate Banks by the parent State Bank of India is the first in the series of steps being kicked off to have 4-5 large Banks in the country which will be among the Top 100 Banks of the world.
The customers stand to gain when the SBT merges with the SBI. Interests are lower by 0.5 percent to 1 percent in the SBI on all types of loans. The SBI is also far ahead in facilities including internet banking and mobile banking.
Once the SBI moves into a new technology, it takes one or two years to introduce that same technology to the SBT. We would not have to wait any longer. If a customer has accounts in both the SBI and the SBT, the accounts will be brought under the same identification number. The Reserve Bank of India has directed that two accounts in the same bank should be integrated.
If customers benefit, why is there opposition to this?
SBT is no doubt a household name in the state and people have a sentimental attachment to it. But it must not be forgotten that four-fifths of SBT is owned by SBI and officials from SBI have led SBT for decades. The acquisition is only a technical one, as the group runs on common technology platform, have similar policies, processes and procedures. In my view, apprehensions about the merger in the minds of the people are more an emotional response than a rational one.
Post-merger, what would be the size of the merged entity?
The proposed merger of five small banks with SBI will raise our market share by about 5 per cent, which will make the merged entity 3 times bigger than the nearest competitor. Several duplicated costs which persist today will be reduced as well as repetitive cost will also come down.
The merger will result in the new banking behemoth with assets worth Rs 37 lakh crores – one-fifth the size of India’s GDP.
SBI was at rank 52 in the world in terms of assets in 2015, according to Bloomberg, and this merger will see it break into the top 50. All else remaining the same, the combined entity would be ranked 45th.
Employee unions are against the merger. What do they fear?
There is no need to worry. We will hold talks with employees, shareholders and major customers as soon as we receive the permission for the merger.
The merger will be done only after protecting their interests. We will decide on the deployment of employees before identifying the branches to be closed down. We will retain all 1,700 ATMs in the state. Of the 1,177 SBT branches, about 800 are situated in Kerala. About 25 per cent employees are working outside Kerala. The merger is not expected to hit any technical glitches because we use the same accounting software. We are only left with minor things like changing the accounts and boards. Two branches in the same location will have to be integrated. Their audit is yet to start.
In the earlier merger of two subsidiaries of SBI, what benefits were seen?
The previous mergers were smooth as the technology platform was the same and employee interests were also taken care of.
The RBI is taking steps to curtail NPAs. Is it helping?
The Reserve Bank of India (RBI) on Monday allowed banks to conduct deep restructuring of large accounts to revive projects that can be saved, effectively throwing a lifeline to promoters who risked losing their companies. In short, only those promoters, whose companies contribute to stressed assets of banks, and who have shown no malfeasance in their actions while running the show, can ask for the permission to continue with the management, even if they get reduced to minority shareholders in the process of restructuring.
The two sectors which would benefit are steel and power.
Some of the completed projects in these sectors were hit by external factors. Deep restructuring is done to ensure long-term sustenance.
The strategic debt restructuring (SDR) scheme was of limited use in such cases. Under it, banks could convert debt into equity and take control of a company and sell off the assets. However, if they were not able to dispose of the assets within 18 months, the lenders had to incur heavy provisions.
Why is credit off-take in the country still tardy?
There has been a noticeable slowdown in the demand for credit in the past couple of years due to the deceleration of the economy.
With green-field investment pipeline drying, fresh demand has practically come to a standstill.
The situation was further aggravated by fast growing segments like steel and power coming against road blocks like fall in process, regulatory issues etc.