Centre puts SBI merger on hold

The State Bank of India chairman, Mr O.P. Bhatt, has been asked by the ministry of finance, de-partment of financial services, to withhold the merger process of the State Bank of Indore with itself.
In a confidential letter to the SBI chairman dated October 8, (which is in the possession of this newspaper), the ministry said, “You are requested to kindly consider any further acquisition of the Associate Banks only after a view is crystallised on the subject by the government.”
The letter was in reply to the three letters sent in July, August and September by the SBI regarding its proposed acquisition of its associate banks. The finance ministry said that the government is presently “considering a comprehensive paper for taking a holistic view on consolidation in the public sector banks” and “on further mergers in the SBI group.”
Interestingly, the board of the State Bank of Indore had on October 31, appro-ved a scheme of acquisition of the bank by the SBI.
The government has recently been talking about the need to consolidate the public sector banks into seven or eight large banks and last week said that it was calling the heads of the major and medium banks to discuss how this can be taken forward. This has raised the antennae of the various bank unions and associations, which have come together and called for a strike on December 16.
The immediate trigger for the strike is the green signal of the State Bank of Indore’s board to merge the bank with SBI, even while the conciliation proceedings were under way before the deputy chief labour commissioner (DCLC). On July 3, the representatives of the SBI and the State Bank of Indore had agreed before the DCLC to invite the bank unions for a discussion on the issue and to find an acceptable solution.
Mr Vishwas Utagi, secretary of All India Bank Employees Association, says, “We feel consolidation is harmful not only to the industry’s growth but also to the economy. Today, mofussil banks are growing at 23-25 per cent annually and in this context, consolidation is a retrograde step. It is also against the interest of the depositors who will be deprived of banking services.”
Since the government has been talking of financial inclusion, he said consolidation is a retrograde step. The Citibank model had failed globally and the government is trying to follow this model, he points out.

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