SBI merger with five associate banks from 1 April

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swatkats

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State Bank of India (SBI) expects to soon receive RBI's approval for the detailed merger plan of its associate banks.

The detailed merger plan, including financial implications, HR and asset-liability issues are being vetted by the RBI, sources said, adding that the approval from the central bank is expected anytime soon. The scheme of acquisition of all five associates along with the Report of the Expert Committee have been submitted to RBI for approval, sources said.

Upon approval, RBI will submit the scheme of acquisition as approved by it to the Government of India for approval and issue of order of acquisition.

Meanwhile, SBI has started the process of change of account number due to proposed merger of associate banks. Earlier this year, the government cleared the proposal to merge SBI with its five associate banks -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Mysore, State Bank of Patiala, State Bank of Hyderabad -- and the new Bharatiya Mahila Bank (BMB).

In August, SBI had said that all its associate banks along with BMB will be merged into it and that will add an additional Rs 8 lakh crore to its assets, making it a banking behemoth with total assets of Rs 30 lakh crore, an increase of about 36 per cent.

With the merger of all the five associates and BMB, SBI will become a global-sized bank and could compete with the largest in the world, with 22,500 branches and 58,000 ATMs. It will have over 50 crore customers.

SBI has close to 16,500 branches, including 191 foreign offices spread across 36 countries. SBI has already merged two of its associates -- State Bank of Saurashtra in 2008 and State Bank of Indore in 2010 -- with itself.

Last week, SBI Chairperson Arundhati Bhattacharya said that the merger of associate banks with SBI itself is on track and remains unaffected by the demonetisation move.


Source: http://www.business-standard.com/ar...r-of-associate-banks-soon-116112700191_1.html
 
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I remember some employees of the associate banks going on strike to demand pay parity, pension etc. Have those been solved?
 
^ Looks like some of their demands have been taken care of regarding pay etc. The issue seems to be with Travancore subsidiary, They marked it as loss making even though it's profitable since 70 years.

Overall picture sounds promising for SBI with expected Improvement.

Btw, For some reason I've found SBI as the best bank out there, At least my branch is kinda cool.
 
swatkats said:
^ Looks like some of their demands have been taken care of regarding pay etc. The issue seems to be with Travancore subsidiary, They marked it as loss making even though it's profitable since 70 years.

Overall picture sounds promising for SBI with expected Improvement.

Btw, For some reason I've found SBI as the best bank out there, At least my branch is kinda cool.
Click to expand...
The SBI branch near my house has quite a number of young guys and a few old timers. I could not find a fault with the way the branch works. Pretty efficient and knowledgeable. 6-7 years back, a middle aged clerk knew much more about net banking and how account info is stored in back end than a similarly aged branch manager in my home branch.

But I have visited a few other SBI branches also. In those I did not have a good experience. A colleague wen't to open his PPF account and he was made to wait for 1hr before they started processing his info. In my home branch, I was able to open a PPF account in 15-20mins. And they also linked the PPF account with my net banking ID.
My colleagues have tried getting their PPF accounts linked with their netbanking account in various branches but till now they are unsuccessful.
 
SBI is a good bank to be with. ICICI is probably the worst and their subsequent loan department. I had a harrowing experience with them, which I will post about soon. They are lying and conniving in their dealing.
 
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swatkats said:
PPF? For non salaried?

I've helped people fill up ppf forms but never bothered about this.


Also the best thing about my SBI branch is apparently you start speaking in English they give you a little more respect, couldn't understand why!!
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Normal PPF account opened by people having Savings bank account already with SBI. All were salaried people.
 
swatkats said:
The issue seems to be with Travancore subsidiary, They marked it as loss making even though it's profitable since 70 years.
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Not this again. What is the factual proof backing this statement? Is it that they have reported losses in quarters this year? I haven't looked into it closely myself but For one, accounting and public funds are a funny game - people can be lying about so called profits for years and never go down because they are PSUs. Two, profit making is pretty subjective when it comes to finance companies. One could keep NPAs for a long time on the books, don't write them off or even make appropriate provisions for them to appear profitable for a long time. I haven't looked closely into these so can't say for sure if that is case.

But, here's what is happening for SBH:
"The SBH officials say that this was the first time that the bank has ever reported losses in its history! This quarterly loss was too big considering the fact that the bank had reported a net profit of Rs 1,064.93 crores at the same quarter during the financial year 2015 – 2016. During the first quarter of this financial year, which ended in June, its net profit fell to as low as Rs 28 crores from a profit of Rs. 251 crores a year ago as provisioning towards NPAs rose to Rs. 892 crores from a little over Rs. 300 crores during the corresponding quarter of the previous financial year. The provisioning requirement blew up to Rs. 2,266.7 crores by the time it concluded the second quarter which ended on September this year."

Source: https://indianceo.in/news/sbh-reports-loss-ahead-merger/

and SBT;
"State Bank of Travancore (SBT), an associate of SBI, on Wednesday posted a loss of Rs 587.68 crore for the second quarter ended September 30 as bad loans surged almost three times.

Gross non-performing assets (NPAs) rose nearly four-fold to 11.55 per cent of gross advances from 3.82 per cent a year ago. The net NPAs also increased to 7.20 per cent from 2.27 per cent. As a result, provisions and contingencies also increased nealy four-fold to Rs 786.99 crore as against Rs 231.32 crore in the same quarter a year ago."
Source: http://www.moneycontrol.com/news/results/state-banktravancore-posts-rs-588-cr-lossq2_7837881.html

One can obviously put a tinfoil hat here and claim that "they" are targeting SBT/SBH but one has to wonder how do NPAs increase 4 times within a quarter, unless you are going back and re-doing your books for the upcoming merger as you will need to present them to outside auditors.

Again, I don't know much about finance companies but this is as good as a theory of someone marking a profitable business as unprofitable.
 
Well this is the problem with mainstreaming reporting, all half baked news. They do not verify or give their own take while writing the article.. Thanks @abhi1984 for adding meaningful content to this thread.

Even SBH was protesting merger just because Telangana state would lose taxes, because SBI is going to be headquartered in Mumbai and the revenue will go to MH. http://indiatoday.intoday.in/story/...enue-if-sbh-merged-with-sbi-cpi/1/690074.html ... Same should be the case with Kerala wing.


Fact of the matter remains SBT and SBH are making losses and decent amount of Debts.
 
Actually its precisely that people feel the need to give their own take while writing articles that we are in this mess. News is supposed to be about who, what, when and where. Thats it. It is not supposed to be opinion pieces. Take for example the SBH link I provided (indianceo), towards the end it says:

"The SBI could have been a little patient and waited until the merger before classifying assets as NPAs for the sake of provisioning. That way SBH would have created history as a bank that made profit since its inception in 1941. It would have made both SBI and SBH proud and would have attracted additional customers to SBI due to the news beamed on newspapers and televisions across India."

The language is milder than the ones you might have seen in other news outlet but it does try to provide an opinion and a folksy one at that. The reason I say folksy because the opinion doesn't have any facts behind it. To see what I mean, read the article again and one thing is clear that the writer likes the SBH profitability for years. Now what would have happened if SBI took the advice and mark NPAs after the merger? Well, there would've been another article about how the merger was a bad idea and how SBI was handed over a "very profitable" SBH but now it is a "loss making unit". If SBI defended themselves about provision marking, the article would say - if SBI knew about provisioning earlier, why dint they ask SBH do it "before merger"?

But then opinions are not inherently bad in themselves if they are presented clearly. As it says in the article:

“SBI advised us to make appropriate provisioning on a prudent basis based on the inherent weakness in common loans and advances in line with the lower IRAC (Income Recognition, Asset Classification) status in SBI Group as a whole. The bank has reclassified such common accounts which have resulted in increase of NPAs by Rs 2,623.90 crores, incremental provisions by Rs. 2052 crores, interest reversal of Rs 132.67 crores and its consequential impact on all ratios”, SBH managing director, Santanu Mukherjee said. Spokesperson of the bank said they cannot rule out some fresh slippages during the quarter, the provisioning made was not entirely on account of these slippages. “Based on the SBI directions the bank had to make provisioning even towards standard assets of some accounts, which had already turned NPAs or substandard assets in SBI books,” he said.

So the questions are - What is IRAC? Was SBH not following IRAC? If they did what is the difference with what SBI does? Is SBI's IRAC correct or the SBH one?
What does the last line mean? What are the rules for NPA or substandard assets in SBI books vs the SBH one? And why there is a difference in asset classification between SBI vs SBH? (which btw is the million dollar question I highlighted earlier, these so called "profitable units" have been marking NPA as standard for years now)
But the writer gave middle finger to the facts and went straight to opinion.

As for the CPI secretary, less said the better. CPI is not exactly known for their brains than just being populist. Like Yechury's brilliancy on SBI and Mallya. But they are a general representation of Indian mentality of "penny wise, pound foolish". We would rather dump 100 down the drain than let anyone take a rupee out of it.
 
SBI fears that depositors in associate banks who are used to communicating with officers in their mother tongue whichever corner of the country the branch is, may also leave. For instance, the Telugu diaspora tends to move to State Bank of Hyderabad anywhere in the country, and so is the case with Malayalis banking with State Bank of Travancore, but this connect may cease to exist soon.

“It’s an opportunity for us. Local customers of State Bank of Travancore may miss the local touch that the bank offered all these years.," says Ganesh Sankara, executive director at Federal Bank, the second largest bank in Kerala after SBT. "Customers also don’t know what would be their pecking order in SBI. Several of its loan clients have approached us. There is a fair possibility that lots of them may gravitate to local banks.”

"It is not surprising that several customers with associated banks have expressed their willingness to leave the bank as they face the risk of losing their identity once they become SBI customers. A Rs 10-crore borrower is a sufficiently important customer for any associated bank and such people used to get personalised services. In SBI, the Rs 10-crore customer will be a marginal entity,"
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says Amitabha Guha, SBI’s former deputy managing director, who also had headed two associate banks between 2002 and 2008.


http://economictimes.indiatimes.com...f-customer-retention/articleshow/55694593.cms


words in bold are True but that is again a minority.
 
The whole argument about local touch is a self fulfilling prophecy or rather a lie with repeated often becomes the truth. Because I have walked into even ICICI in Hyderabad and the front facing staff hired knows Telugu. If they don't mostly they are not going to get the job. That has to be the case with employees at villages too.
While the statement about "all over India" is well....SBH or SBT might have coverage in TN, Karnataka etc but I believe fleeting presence in Maharashtra, Orissa and even lesser as you go up. They had for years relied on SBI to give their customers "all India" coverage.

The sizes of account affecting are true, yes but then it comes down to if most banks have the coverage SBH/SBT enjoyed on back of SBI.
 
Mergers delayed

Ms. Bhattacharya also said that merger of SBI with its associate banks, which was expected to be completed by the end of the financial year, is now likely to happen in the first quarter of the next financial year.

“We still have to get the government approval (official notification of the scheme of merger). Even if I get it now, doing things in the last quarter is not a wise thing. Because, there will be IT system changes and by mid-February, we (traditionally) close down all IT systems. As you know, sometimes IT systems can impact something quite unintentionally. We do not want to take any risk at the time of annual closing. So, we may just do the annual closing and then look at it (the merger),” Ms. Bhattacharya added.

http://www.thehindu.com/business/In...s-cuts-loan-growth-target/article16978301.ece
 
Here is a list of five such things which will be significant in this merger:

Asset quality: By virtue of being the country’s largest lender, the SBI is bound to have bad loans on its books. However, despite being much smaller in size, the associate banks, too, have accumulated large amounts of bad loans. When the entities are merged, these bad loans will become part of one bank. Consolidation would help in better deal with these accounts as there are a number of common accounts among these banks.

However, the minimal impact of the various available stressed asset tools such as joint lender forums (JLFs), strategic debt restructuring (SDR), 5/25 refinancing and scheme for sustainable structuring of stressed assets (S4A) maybe a cause for concern.

Profitability: Typically a merger among banks negatively impacts the profitability of the combined entity due to various transition issues. Associate banks such as State Bank of Travancore and State Bank of Mysore have already reported losses in the December quarter owing to the asset quality concerns on their books.

Moreover, this is a low-credit growth period, with industry credit growth clocking in at around 5% year-on-year. With low interest income, the ability of these associate banks to turn the corner and become profitable may be limited. It would be interesting to see how the merged entity would maintain its profitability.

Technology: While SBI has been at the forefront in adopting new front end and back end technology to be competitive in the market, some of the associate banks are still behind in these regards. SBI has an active information technology department that works on a number of innovative solutions for the bank.

After the merger, the rollout of all these solutions will have to take place at a much larger scale, adding to the cost of making this technology available to customers. There will also be concerns around security of the customer data across these associate banks.

Branch rationalization: In years of expansion, SBI and its associate banks have opened a large number of branches across the country. Some of these branches are also opened next to each other. With the merger, the need to have two or three branches next to each other may not be necessary, leading to a rationalisation of some of these branches and merging their functions with the main branch.

This principle may also be applied on automated teller machines (ATMs), in a bit to manage the cost of this merger. The combined entity will be the largest bank in India will have the biggest branch and ATM network in the country.

Employee reallocation: In any merger, concerns around rationalisation of the headcount is always a major concern. Typically people are moved to other departments and are required to adjust to the new culture of the combined entity. Moreover, seniority related matters among mid-level employees may also become a concern as any pending promotions may now have to wait before the merger is fully completed.

The merger has already attracted opposition from employee unions of the associate banks last year. As the merger now becomes a reality, there is a possibility of seeing more such protests.


http://www.livemint.com/Industry/9d4mslYQA28k0V7GRJW3tM/SBI-merger-Five-things-to-watch-out-for.html
 
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