SBI Merger:  Boon or Bane?

India is witnessing a phase of consolidation in current scenario. Every sector nowadays is looking for the adoption of merger and acquisitions with the guiding aim of making the combined entity stronger and competitive. Indian banking sector is also following the same trend. Few months back State Bank of India announced the merger of its five subsidiary banks – State Bank of Bikaner and Jaipur, State Bank of Patiala, Sate Bank of Mysore, State bank of Travancore, State Bank of Hyderabad and Bhartiya Mahila Bank Limited. The merger would certainly strengthen the bank at global level. The step helps in coping with various private sector banks and foreign banks in present vibrant business environment. The efficiency of bank will improve by rationalisation of branches, common treasury pooling and proper deployment of trained manpower.

Rising Non Performing Assets (NPA) is one of the biggest challenges for State Bank of India nowadays. The ineffective borrowing lending practices, economic slowdown and lenient collection policies make it difficult to realize the dues from corporate borrowers. The merger would help in easing the pressure of NPA and increasing the profit margins. The decision is also justified in terms of cost cutting as instead of establishing new branches, it can utilize the already existing branches of its subsidiary banks. Although the employees of associate banks are not happy with this move as they fear losing their jobs after this merger. Integration of over 70,000 employees in SBI raises a question on effectiveness of the merger. Cultural issues also prevail specially in case of State Bank of Travancore and State Bank of Patiala .

Other challenges that would be faced are variability in pension liability provisions and accounting policies for recognizing bad loans. To give some relief to the employees of associate banks management of State Bank of India, however offer various benefits in terms of better pay and wage packages. In addition, it is proposed that employees would be having global outlook and opportunity to get posted in foreign offices of State Bank of India. Besides, customer of associate bank will also get benefited as they could avail same services and facilities given to existing customers. Speculations are many regarding positive and negative aspects of this merger but actual outcomes can be analysed only after its implementation. Further the bank will be able sustain itself in this new environment becomes a reckoning question. Lastly it can be concluded that the outcomes of merger are generally seen after a few years. The post analysis of such mergers determines their success or failures.

Dr. Deergha Sharma

Assistant Professor

Dept. of Management Studies