Rajnish Kumar, the chairman of State Bank of India (SBI) has categorically ruled out any absorption of smaller banks by SBI in the short term. Speaking to media outlets in New Delhi, Kumar’s statement comes a few days after the Indian government ordered the merger of Bank of Baroda, Vijaya Bank and Dena Bank in lieu of further mergers of state-owned banks.
SBI is India’s largest bank, holding a little under a quarter of all the assets in the banking system, which begs the question: how much room does it have for economies of scale from mergers?
While Kumar agreed that there were far too many public sector banks in India and that they required consolidation for improved management and capital strength, he explained that any further acquisitions of state-owned banks by SBI would give it monopoly powers.
Kumar added that SBI was still focussing on the integration of the six banks it absorbed last year, explaining that it would take around two to three years for the synergies from the merger to start manifesting themselves. In April 2017, SBI began the process of merging with five of its subsidiaries- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad as well as Bharatiya Mahila Bank.
While the merger proved to be a drag on SBI’s profitability and added to its already-high level of non-performing loans and provisioning requirements, Kumar said last month that he expected the bank to report a profit in the quarter ending September.
Separately, Kumar said that SBI was on course to resolve around 7 to 8 stressed power accounts before the expiration of the Supreme Court’s grace period on 11 November. The resolution of around ₹170 billion worth of non-performing loans will come as a significant relief to the bank, which currently holds nearly 20% of all the bad loans in India’s banking sector.
Re-disseminated by The Asian from Business Insider India