India Backs State Bank's Plan to Merge Units to Gain Efficiency

  • Government seeking consolidation of banking industry: PIB
  • Merger to help reduce cost of funds, manage cash flows better

India’s cabinet approved state-run State Bank of India’s plan to absorb five of its units, a plan that could reduce cost of funds and boost operational efficiency, Finance Minister Arun Jaitley said Wednesday.

The units, including State Bank of Travancore and State Bank of Bikaner and Jaipur, will be merged into the nation’s biggest lender, Jaitley told reporters in New Delhi. State Bank of Hyderabad, State Bank of Mysore and State Bank of Patiala are the other subsidiaries that will be amalgamated into the parent, the Press Information Bureau said in a statement.

State Bank of India last year approved a plan to merge the units and Bharatiya Mahila Bank with itself, amid a government push to consolidate the nation’s fragmented banking industry. The plan to merge Bharatiya Mahila Bank with State Bank is under consideration, Jaitley said Wednesday.

The merger is expected to result in cost-savings, including 10 billion rupees in the first year, arising from operational efficiency and lower cost of funds, according to the statement.

The merger will lead to “better management of high-value credit exposures through focused monitoring and control over cash flows, instead of separate monitoring by six different banks,” according to the government statement.

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