What would the cabinet approval of the merger of 5 associate banks mean for SBI?

On February 15, the Union Finance Minister Arun Jaitley, declared that the five subsidiary banks of the State Bank of India (SBI) will be merged together soon. After the cabinet approval yesterday, it would finally end the long wait for the merger of associate banks with SBI. The SBI Chief Arundhati Bhattacharya had stated earlier this week that SBI is ready for the merger and is waiting for the government orders.

As a result of the merger, five associate banks – State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore will come under the SBI administration.

Although there is no particular date mentioned for the merger, the statement issued by the finance minister states, “The cabinet has 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.” Repealing the two bills would mean that the regulations and laws under the acts will become void. The acquisition will be made under the Section 35 of the State Bank of India Act, 1955, which will result in a creation of a stronger, merged entity.

The statement released by the Finance Ministry further stated, “Acquisition of the subsidiary banks of State Bank is an important step towards strengthening the banking sector through consolidation of public sector banks.”

PaGaLGuY spoke to some banking aspirants regarding the merger and they were split in opinion. One aspirant mentioned that the merger could actually mean increased PO posts in SBI recruitment, while another was of the view that it might just decrease the number of posts.

Banking professionals should not worry about the acquisition and merger as the SBI Chairman has already mentioned earlier that there will be no lay offs and those employees who are from the associate banks will be provided letter of employment from SBI.

However, it will be challenging for professionals working in the associate banks as they might get posted to other departments and need to adjust to the new work culture. Pending promotions and managing the senior level banking positions will also be an issue in the days to come. The merger means that SBI will have nearly 2.71 lakh employees across 23,899 branches in the country.