SBI Merger Current Affairs

Lok Sabha passes State Banks (Repeal and Amendment) Bill, 2017

The Lok Sabha has passed the State Banks (Repeal and Amendment) Bill, 2017. The bill seeks to repeal the two Acts namely State Bank of India (Subsidiary Banks) Act, 1959, and State Bank of Hyderabad Act, 1956.

It also seeks to amend the State Bank of India (SBI) Act, 1955 to remove references to subsidiary banks and powers of SBI to act as an agent of the RBI for subsidiary banks.

Key Facts

Repealing of SBI (Subsidiary Banks) Act and State Bank of Hyderabad Act: These two acts have established the State Bank of Bikaner, State Bank of Patiala, State Bank of Mysore, State Bank of Hyderabad and State Bank of Travancore.  These banks were subsidiaries of the SB). This repealing of two acts is consequent to the decision of the Union Cabinet February 2017 to approve merger of five subsidiary banks of SBI were merged with it.

Amendments to the SBI Act: The Bill removes references related to subsidiary banks from the parent Act. These references include the definition of a subsidiary bank and powers of SBI to act as an agent of the RBI for subsidiary banks.

Background

The Union Cabinet had approved the merger of five associate banks along with Bharatiya Mahila Bank with SBI. The five banks were State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala. After the acquisition by SBI, the subsidiaries banks have ceased to exist and, therefore, it was necessary to repeal the two Acts. The merger had made State Bank of India one of the 50 biggest banks of the world. The main motive behind the merger was to increase the capital base of the bank to enable it to disburse more loans.

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Five State Banks, Bharatiya Mahila Bank merge with SBI

Five associates and the Bharatiya Mahila Bank have officially merged with country’s largest lender State Bank of India (SBI). With this merger, SBI joins the league of top 50 banks globally in terms of assets.

The five associate banks are: State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

Key facts
  • With this merger, SBI’s market share has increased to 22.5-23% from 17% with total business of over 37 lakh crore rupees.
  • The merged entity now has a deposit base of more than Rs. 26 lakh-crore and advances level of Rs 18.50 lakh crore accounting for one-fourth of the deposit and loan market in the country .
  • SBI now has 2.77 lakh employees, 50 crore customers and more than 25,000 branches and 58,000 ATMs. Its total customer base of the SBI now has reached to 37 crore across the country.
  • Post-merger, all the customers of associate banks will now enjoy the benefits of a wide array of digital products and services offered by SBI.
Comment

The merger will help SBI to rationalise its branch network by relocating some of the branches to maximise reach. This will also help to optimise its operations and improve profitability. It will also bring in substantial cost saving and synergy in treasury operations. Moreover, the combined entity will enhance the productivity, mitigate geographical risks, increase operational efficiency and drive synergies across multiple dimensions of the SBI.

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