Associate Banks of State Bank of India to offer VRS before merger with SBI

Kolkata, December 9:  The Associate Banks of State Bank of India (SBI) have started preparations to unveil voluntary retirement schemes (VRS) for their employees before the proposed merger with the parent bank. 

State Bank of Hyderabad (SBH) board has approved the VRS while other associate banks will place the scheme before their boards in the next few days, according to two senior SBI group officials.

The VRS in associate banks would help SBI curb in staff cost escalation after the merger. SBI’s staff expense was Rs 6,853 crore in the September quarter, rising 11.6% year-on-year. SBI’s pension obligation is estimated to be around Rs 3,500 crore. This would rise once associate bank employees come under SBI fold.

SBI has nearly 2.02 lakh employees while its associate banks have a cumulative headcount of 70,000. SBH, the largest among all the five associate banks, has around 18,000 employees. State Bank of Patiala has around 15,000.

The details of VRS is not known as yet. Sources in the SBI said all associate bank employees opting for it would get similar benefits. A good chunk of them are likely to go for VRS as there has been apprehensions across levels about their pecking order under the State Bank of India.

The government approved the merger in August while the exercise is likely to be over by March 2017. The integration of IT platform-- a key aspect to SBI’s merger with associate banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore– is in the final stages.

SBI chairman Arundhati Bhattacharya earlier said there would be no pay cut and job loss for associate bank employees after the merger. At the time of State Bank of Saurashtra and State Bank of Indore's merger with SBI, there were allegations that fairness was compromised demotivating associate bank employees.

As on September 30, associate banks cumulatively have Rs 5,21,344 crore of deposits and Rs 3,92,436 crore in advances. This will get added to SBI’s Rs 18,58,999 crore of deposits and Rs 14,81,832 crore of advances, making the group's total business nearly five times of ICICI Bank's business of Rs 9,03,371 crore.

SBH cuts lending rates

State Bank of Hyderabad has cut interest rates by up to 75 basis points on various retail loan products. This is with effect from August 21 for all new loans under floating rate. Its focus this fiscal will continue to be on retail business, an SBH release said. For housing loans, the interest rates have been reduced by 25 basis points for loans up to Rs 30 lakh and 50 basis points for loans above Rs 30 lakh — the new rates are 11 per cent and 11.50 per cent, respectively. On car loans, the new rate is 11.25 per cent. On gold loans, the new rates are 13 per cent for loans up to Rs 1 lakh and 13.25 per cent for loans above Rs 1 lakh.

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.