SBI Group finalises plans for voluntary retirement scheme

Mumbai, February 19:  With State Bank of India (SBI) in the last lap of merging five associate banks with itself, SBI Group has finalised plans to launch a voluntary retirement scheme (VRS) which could lead to a lower headcount in the number of employees from the total employee base of 73,000 in the associate banks.

The Union Cabinet had last week cleared the merger of five associate banks — State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT) — with SBI. While SBI is yet to provide details of the branch rationalisation plan, an official of SBT has claimed that the merger plan could lead to closure of SBT’s 30 per cent of branches. While the five associate banks have 6,717 branches, SBT has 1,117 branches. “We have information that 204 branches have been identified in Kerala and 59 in Tamil Nadu,” an official said.

In a statement last week, SBI said, “The merger will result in creation of a stronger entity. This will minimise vulnerability to any geographic concentration risks faced by associate banks. This merger is an important step towards strengthening the banking sector.” A formal notification in this regard is awaited from the government wherein the effective date of merger will be indicated, SBI said.

The five associate banks have a total deposit base of over Rs 5 lakh crore and 8,964 ATMs across India.

The boards of associate banks have already approved the VRS plan, but they are yet to notify the number of employees eligible for the VRS, said an SBI official. “In view of the impending acquisition, your bank may consider implementing a VRS for employees as an employment-friendly initiative. The scheme would provide a good opportunity to employees who may genuinely want to retire voluntarily on account of the uncertainties related to possible relocation of job profile post acquisition,” SBI said in a letter to the MD of State Bank of Travancore.

The VRS scheme is open to those staffers who have put in 20 years or have completed 55 years as on September 30, 2016. It has offered ex-gratia amounting to 50 per cent of salary for residual period of service subject to a maximum of 30 months salary.

However, bank unions have said “closure of associate banks by mergers is unwarranted as these banks are in existence for very long in various states” and they have “sound financial fundamentals, commendable financial ratios, well-established branches and serving the people at large in rural, semi-urban and urban centres”. “Associate banks are premier banks in the respective states with sizeable market share and credit deployment to productive sectors. They are immensely financing agriculture, micro-small-medium-large industry, trade, service sectors at the regions and states,” said K S Krishna, general secretary, State Sector Bank Employees’ Association.

He said associate banks have been forced to give excessive provisions for the reason that those loan accounts with the associate banks — even though are standard assets — may be considered as NPA if the same group’s account with SBI is NPA. “When the associate banks made a net profit of Rs 1,700 crore in the half year of FY16, now the banks have been forced to show a loss of Rs 5,100 crore in FY17 half year. The operating profit has risen from Rs 5,000 crore in FY16 to Rs 5,600 crore in FY 17. With the announcement of merger, work in the associate banks has come to a standstill,” Krishna said.

Banks offer festive bonanza to customers

Mumbai, August 18: With an eye on getting business in the festive season, banks have started offering discounts on interest rates and waiving processing fees to attract retail customers. Mumbai-based Union Bank of India on Saturday announced it has waived processing fees on home and auto loans from August 15 to January 26.

State Bank of Bikaner and Jaipur, an associate of the State Bank of India, has found an innovative way to attract customers. While the bank is giving a discount of 25 basis points on retail loans across the board, customers who are applying for a car loan above Rs 10 lakh on line will get an additional rebate of 25 basis points, thus making the effective interest rate at 10.5 per cent which is the base rate of the bank, said Shiva Kumar, managing director, SBBJ. He added, the bank was offering 10.75 per cent for home loan customers, and those who apply on line will get a rebate of 10 basis points.

With credit growth slowing down in the current financial year amid high interest rate, banks are seeing the festive season as an opportunity to boost their credit portfolio. State Bank of India, for example, had said that it expected growth in retail credit to offset the impact of slowdown in corporate credit. The country's largest lender had earlier announced the cut in the interest rates for home and auto loans, immediately after Reserve Bank of India announced a one per cent SLR cut in July. SBI's home loan rates stand at 10.25 per cent for home loans up to Rs 30 lakh and 10.4 per cent for the loans above Rs 30 lakh. It also slashed its interest rate on car loans by 50 basis points to 10.75 per cent across the tenors.

Another public sector lender Andhra Bank is expected to take the decision about cutting interest rates on retail products. “We will be taking a decision soon” said, K K Misra, executive director of Andhra Bank.

Central Bank of India has already launched some products and is in the process of launching few more schemes both on asset and liability side. It has launched a special 555 days fixed deposit product in which the interest rate is higher by 50 basis points that the normal deposits of that tenor. It has also launched a recurring deposit account where the customer has the flexibility of putting the money according to his/her adjustment. Normally in the recurring accounts one has to put a fixed sum every month. “We will be waiving the processing fees on the retail loans, and where there is scope of reduction of interest rates we will cut the rates” said Ram Sangapure, general manager (retail), Central Bank of India.

SBI might absorb one associate bank this year

Mumbai, August 13: State Bank of India (SBI) is likely to merge one of its five associate banks in the current financial year. The board of the country’s largest lender has given its approval for the merger, and SBI will now start the process of identifying an associate for the merger. SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010. According to bank officials, this time the debate is whether the bank would go for a listed entity or an unlisted entity. The unlisted associate banks are larger than the listed entities.

“The choice is between merging a listed entity and an unlisted entity,” said an official. “Merging an unlisted entity is relatively easier but such banks are huge. The listed entities are smaller but issues regarding swap ratio will have to be looked at. Ideally, we want to merge an associate entity once every two years.”

Of the five associate banks of SBI, State Bank of Hyderabad (SBH) and State Bank of Patiala are unlisted, while State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ) are listed entities. Apart from State Bank of Mysore, the others have reported profit growth for the quarter ended June.

While SBM’s profit dipped to Rs 40 crore from Rs 64 crore reported during the first quarter of the previous financial year, State Bank of Patiala posted 87 per cent growth in profit, SBBJ’s profit growth was 31 per cent, while SBT and SBH 30 per cent and 18 per cent respectively. Sharad Sharma, who was the chief general manager in SBI, recently took charge of State Bank of Mysore as the managing director.

The State Bank group has a network of 20,193 branches, including 5,096 branches of its five associate banks.  The five associate banks have six per cent market share in loans and deposits, each.

SBI Chairman Pratip Chaudhari recently said the bank management was giving special attention to State Bank of Mysore to increase its profitability. Incidentally, Chaudhuri was instrumental in the successful merger of SBI with State Bank of Saurashtra — the first  that was merged.