SBI merger ratio announced for SBT, SBM, SBBJ and BMBL

sbiState Bank of India board of directors has approved the share swap ratios for the upcoming merger of the bank with other State Bank entities.

“The Central Board of Directors of the State Bank of India (SBI), at its meeting held on 18.08.2016 have accorded their approval to the Scheme of Acquisition of State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore and Bharatiya Mahila Bank Limited by State Bank of India, under Section 35 of the State Bank of India Act, 1955, subject to approval of the Scheme by the Reserve Bank of India and the Government of India,” SBI said.

The ratios approved are as follows: 28 SBI shares for every 10 shares of SBBJ, 22 shares of of SBI for every 10 equity shares of SBM and SBT and 4.42 cr shares of SBI for every 100 crore shares of BMBL.

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State Bank of India is India’s largest bank and has more than 14,000 branches. The merged entity is likely to have around 24,000 branches, out of which around 30% will be merged or shut down. The associate banks have a little over 70,000 employees, or 34 per cent of SBI’s employee base.

The merger announcement has been good news for investors in the banks’ stock, which has gained 39%, while shares of its listed associates have surged 26-43% ever since the merger was announced.

SBI has indicated it wants to complete the merger in 2016-17.

However, employees of the banks have opposed the merger tooth and nail fearing job losses.

There have also been concerns with the steep rise of bad loans reported by these associate banks in recent months. Though the combined entity was supposed to have bad loans of around 6-7% — in line with SBI’s own NPAs, the ratio of bad loans has shown an increase in the June quarter.

SBI Chairman Arundhati Bhattacharya said the merger is a win-win scenario for both SBI and the associate banks.

“The group will get the benefit of efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base,” the SBI chairman said recently.

The Telangana government also said it wasn’t in favor of merging State Bank of Hyderabad (SBH) State Bank of India (SBI).

“SBH should retain its identity. It is a Telangana bank. It has to remain that way,” said state’s finance minister Etela Rajender said on Wednesday.

The merger plan as approved today does not involve State Bank of Hyderabad and the State Bank of Patiala. It is not clear whether these banks will be added to the merger scheme at a later date or whether another merger process will be conducted after this one is completed.

Banks Board Bureau chairman Vinod Rai said this week that the SBI merger would ‘test the waters’ as far as the possibility of more such moves are concerned.

India has a number of public-owned banks — a legacy of a move by late PM Indira Gandhi to seize control of private sector banks 40 years ago.