SBI Merger and Post Effects

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With recent merger of banks like Mahila Bank with the State Bank of India, the face of state-run banking system is on the verge of a major overhaul. But what exactly is the effect??

• The combined banking entity will be ranked as the 45th largest bank internationally in terms of assets. This will be up 7 ranks from its current 52nd position.
  
• After the merger the cost-to-income ratio is expected to come down to 100 basis points a year. The cost-to-income ratio is company’s costs in relation to its income.
  
• SBI’s employee costs is expected to rise by Rs 23 crore a month.
  
• Analysts surmise the move will lead to higher operating costs for the SBI in near term.
  
• SBI has taken “in-principle sanction” from the government to get into negotiations to acquire businesses of subsidiary banks.
  
• SBI is huge when compared to any other entity that has been merged into it. It has the current balance sheet at Rs 28 lakh crore and this will be 75 percent of the total assets of the new entity.
  
• The All India Bank Employees’ Association (AIBEA) has proposed all the entities to merge and form a new entity in spite of being merged into the SBI. There is a strike on May 20 regarding this.

• All the subsidiaries combined have about 6,400 branches and 38,000 employees, however SBI has more than 14,000 branches, 191 foreign offices across 36 countries, and 2,22,033 employees.
  
• The swap ratio can not be decided without intervention of the Reserve Bank of India, the government and a third valuer who will be required to certify the process and the value.

With this, the State Bank of India is expected to grow at a tremendous speed while competing with the neck break private competitors and stabilizing the economy of India by filling the investment gap.