Executive Board of the nation’s largest banker –State Bank of India has approved the merger of its five associates bank with it.
The merger proposal is already an ongoing process and the Board has given nod to merge the remaining associate banks –State Bank of Travancore, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Hyderabad and State Bank of Patiala. Bharatiya Mahila Bank which was formed few years back will also merged with the banking biggie.
Post-merger, the SBI will be much bigger than the second largest bank in the country – ICICI. And the biggest impact on the banking system is that SBI’s asset will reach around Rs 25 lakh crore which is near to one fourth of the entire banking system in the country. Such a big asset size will make SBI as one of the fifty largest banks in the world.
The new entity should procure around 4 lakh crore rupees to strengthen its capital base.
The merger of the state bank group to form a bigger one is really a countertrend in the global context. Over the last few years especially after the global financial crisis, central banks and governments are trying hard to downsize banks to overcome the problems of ‘moral hazard’ and ‘too big to fail’.
Here, they are reducing the size of big banks so to make regulation simple.