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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Q. SBI Merger issue: In the backdrop of ongoing merger of SBI and it’s associate banks, discuss the benefits and challenges before new entity.
Jun 21, 2016 Related to : GS Paper-3

Ans :

In News-

Recently union cabinet has approved the takeover by State Bank of India (SBI) of all its associates banks and Bharatiya Mahila Bank. The takeover process has been already approved by the respective banks.


Nearly after 5 years of pause, recently SBI and its associated banks and Bhariya Mahila Bank have decided to merge with SBI. The same has been approved by the union cabinet recently. It is considered as first move towards the consolidation of countries struggling public sector banks.

Benefits of this merger-

  • With the merger, the new entity with a ₹37-lakh crore balance sheet, will be four times the size of its closest rival and command a network of over 24,000 branches, with 30% market share.
  • It expected to generate significant cost savings through pooled treasury operations, a common technology platform and a rationalisation of overlapping branches.
  • SBI will attain the balance sheet size and scale that will help it break into the big league of the top 50 global banks, thus enabling it to borrow at low rates from the global capital markets.
  • This is a definite positive, given that the expanding Indian economy has so far lacked global-scale financial institutions that can bankroll its large scale investment needs.


  • Though the associate banks carry higher restructured loans than SBI, their reported NPAs are comparable and a revaluation of their assets is expected to bolster SBI’s capital base too.
  • SBI may face various issues while integrating the associate banks’ 70,000-strong workforce like ironing out seniority issue, rationalising branches without retrenchment etc.
  • Integration is expected to take an immediate hit of about ₹4,700 crore to SBI’s profits due to higher pension liabilities from associates.
  • After merger, due to its huge size and scale it may generate issue of regulation and may warrant close monitoring by regulator.


The issue of merger may come with challenges, but its benefits over weighs challenges. It will generate more benefits to both investors as well as borrowers. A strong banking system is critical for sound economic growth of India and it is natural to improve the comprehensiveness and quality of the banking system to bring efficiency in the performance of the economy. In this background merger of associate banks with SBI is welcome move.

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