Merger of State Bank of Indore to take place with parent bank SBI

In a recent meeting with bank chiefs the Finance Minister, Pranab Mukherjee had approved the consolidation process among the State-owned commercial banks, following this State Bank of India (SBI) has begin the process of merger.

Working on the same line on Friday the board of State Bank of Indore passed a declaration to open the way for the merger process with the SBI. At present the SBI is holding 98.05 per cent stake in State Bank of Indore, a smallest associate bank.

Following this the SBI board met in Mumbai has passed a declaration for the merger of State Bank of Indore with the parent bank. This is the second associate bank to be merged with the parent after the State Bank of Saurashtra in July 2008. In case the merger process of State Bank of Indore gets through then only five associate banks will independently exist within the Group they are State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore, and State Bank of Patiala.

The latest consolidation process is being taken up in spite of the Government-Reserve Bank of India appointed Committee on Financial Sector Assessment (CFSA) which recommended that banks should not be reckless in merger process in the current economic conditions. According to the RBI Deputy Governor, Dr K. C. Chakrabarty the current economic environment is not matured for consolidation among the public sector banks and there main focus should be on financial inclusion.

In 1960 State Bank of Indore became a subsidiary of the SBI. The bank is having around 500 branches, with as many as 357 in Madhya Pradesh. By the end of the fiscal year March 31, 2009, it has made a recorded profit of Rs 278.92 crore. As on March 31 banks total business accounted to about Rs 50,500 crore. It is having a network of 400 automated teller machines (ATMs).

On Friday in Indore a board meeting of State Bank of Indore was held in which the workman-director, Mr Atul Pradhan, gave a nonconforming note on the declaration that was taken up in the meeting as a table agenda.

Sources closely related to the developments said the board approved the declaration by a majority vote with five members in favor of the proposal and only one (the workman director) nonconforming.

Mr Alok Khare, President of the All India Bank Officers’ Association, told Business Line in the meeting there was no officers’ representation as the board seat for officers is currently vacant.

Banking industry observers said that it would be remarkable to see if the proposed merger of State Bank of Indore with SBI will come under the scrutiny of the Competition Commission of India (CCI). Although the CCI is functional, the provisions related to regulation of combinations under the Competition Act are yet to be reported.