The Union Cabinet,
chaired by the Prime Minister Shri Narendra Modi has approved the
acquisition by the State Bank of India of its subsidiary banks namely
State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of
Mysore, State Bank of Patiala and State Bank of Travancore.
The Cabinet also approved the introduction of a Bill in Parliament to
repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the
State Bank of Hyderabad Act, 1956.
The merger is likely to result in recurring savings, estimated at more
than Rs. 1,000 crore in the first year, through a combination of
enhanced operational efficiency and reduced cost of funds. Existing
customers of subsidiary banks will benefit from access to SBI’s global
network. The merger will also lead to better management of high value
credit exposures through focused monitoring and control over cash flows
instead of separate monitoring by six different banks.
The acquisition under Section 35 of the State Bank of India Act, 1955
will result in the creation of a stronger merged entity. This will
minimize vulnerability to any geographic concentration risks faced by
subsidiary banks. It will create improved operational efficiency and
economies of scale. It will also result in improved risk management and
unified treasury operations.
The acquisition of subsidiary banks of State Bank is an important step
towards strengthening the banking sector through consolidation of public
sector banks. It is in pursuance of the Indradhanush action plan of the
Government and it is expected to strengthen the banking sector and
improve its efficiency and profitability.