How SBI has Created a Banking Behemoth

9 Apr, 2017 | 3 comments

SBI
With the beginning of the financial year 2017, India is witnessing a revolutionary change in the history of banking industry. India’s largest bank, the State Bank of India is becoming larger than ever with the merger of its associated

banks. Though it’s a very common business phenomenon, but the voluminous activities of such a shape is not only rare in India, but in the entire globe too. Here’s why?

The Background

SBI acquired the control of seven associate banks in 1960. They were the seven regional banks of former Indian princely states, all of them which were renamed with the prefix ‘State Bank’. These seven banks were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of Travancore (SBT), State Bank of Saurashtra (SBS) and State Bank of Indore (SBI – Indore). All these banks used the same logo as its parent bank.

The plans for making SBI a mega bank with trillion dollar business by merging

associate banks started in 2008, and in September the same year, SBS merged with SBI. The very next year, SBI-Indore also merged. In the same year, another subsidiary named Bharatiya Mahila Bank was formed. The negotiations for merging of 6 associate banks (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore and Bharatiya Mahila Bank) by acquiring their businesses including assets and liabilities with SBI started in 2016. The merger of these six subsidiaries was approved by the Union Cabinet on 15 June 2016.

The Reality

The merger process started from 1st of April, 2017 and the entire process would be completed by the fiscal year 2017-18. In the process, State Bank of India associates viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore and Bharatiya Mahila Bank will be merged with the parent bank, State Bank of India. The said merger mooted decades back, got a push from the Government a few months back to create an enormous entity within the industry. Post merger,

more than 7000 branches would be added up to the portfolio of SBI, taking the total number of branches to 24000 and the ATM figures would reach about 59000 across the country. The merger would also take SBI to 45th position in the list of world’s biggest banks with an asset size of Rupees 37 lakh crore and a customer base of 500 million, thereby serving every other Indian. The merged entity will have 25% of the deposit and loan market in the country and the consolidated business will go up to Rupees 44 lakh crore.

The Benefits

The aim of the merger is to exploit synergy, cut overlap and exploit a diverse workforce to make State Bank of India a giant entity. The merger would obviously give SBI better opportunities to serve more people in India with an augmented workforce.

The customers of the associated banks will also have accessed to various digital products and e-payment systems of the Bank, which they were deprived off.

In addition, Mrs. Arundhati Bhattacharya, Chairman, SBI has stated that the merger will not only benefit the Bank and its pre-merger associates but will definitely help its borrowers too. According to her the costs of raising funds for their associate banks were more than the parent bank itself. So, with the merger, the cost of capital would surely go down and the customers, especially of those associate banks, would get their loans at a cheaper rate than it used to be.

Some Astonishing Facts

• The merger integration completed in 48 hours.
• The Database contains data of more than 500 terabytes.
• The customer base consists more than 500 million customers holding more than 740 million accounts.
• The server has the capacity to handle 15000 transactions per second.
• The Bank Server can host 2 billion accounts
• It will process more than 8 crore transactions per day.

The merged SBI, will create a banking behemoth not only in India but enters the league of first 50 banks of the world and most probably the with the largest customer base than anybody else. Being

such a giant entity SBI has smoothly accomplished the post-merger integration process which is really a commendable achievement for the Bank and the country as well.

With the beginning of the financial year 2017, India is witnessing a revolutionary change in the history of banking industry. India’s largest bank, the State Bank of India is becoming larger than ever with the merger of its associated banks. Though it’s a very common business phenomenon, but the voluminous activities of such a shape is not only rare in India, but in the entire globe too. Here’s why?

The Background

SBI acquired the control of seven associate banks in 1960. They were the seven regional banks of former Indian princely states, all of them which were renamed with the prefix ‘State Bank’. These seven banks were State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP), State Bank of Travancore (SBT), State Bank of Saurashtra (SBS) and State Bank of Indore (SBI – Indore). All these banks used the same logo as its parent bank.

The plans for making SBI a mega bank with trillion dollar business by merging associated banks started in 2008, and in September the same year, SBS merged with SBI. The very next year, SBI-Indore also merged. In the same year, another subsidiary named Bharatiya Mahila Bank was formed. The negotiations for merging of 6 associate banks (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore and Bharatiya Mahila Bank) by acquiring their businesses including assets and liabilities with SBI started in 2016. The merger of these six subsidiaries was approved by the Union Cabinet on 15 June 2016.

The Reality

The merger process started from 1st of April, 2017 and the entire process would be completed by the fiscal year 2017-18. In the process, State Bank of India associates viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore and Bharatiya Mahila Bank will be merged with the parent bank, State Bank of India. The said merger mooted decades back, got a push from the Government a few months back to create an enormous entity within the industry. Post merger, more than 7000 branches would be added up to the portfolio of SBI, taking the total number of branches to 24000 and the ATM figures would reach about 59000 across the country. The merger would also take SBI to 45th position in the list of world’s biggest banks with an asset size of Rupees 37 lakh crore and a customer base of 500 million, thereby serving every other Indian. The merged entity will have 25% of the deposit and loan market in the country and the consolidated business will go up to Rupees 44 lakh crore.

The Benefits

The aim of the merger is to exploit synergy, cut overlap and exploit a diverse workforce to make State Bank of India a giant entity. The merger would obviously give SBI better opportunities to serve more people in India with an augmented workforce.

The customers of the associated banks will also have accessed to various digital products and e-payment systems of the Bank, which they were deprived off.

In addition, Mrs. Arundhati Bhattacharya, Chairman, SBI has stated that the merger will not only benefit the Bank and its pre-merger associates but will definitely help its borrowers too. According to her the costs of raising funds for their associate banks were more than the parent bank itself. So, with the merger, the cost of capital would surely go down and the customers, especially of those associate banks, would get their loans at a cheaper rate than it used to be.

Some Astonishing Facts

• The merger integration completed in 48 hours.
• The Database contains data of more than 500 terabytes.
• The customer base consists more than 500 million customers holding more than 740 million accounts.
• The server has the capacity to handle 15000 transactions per second.
• The Bank Server can host 2 billion accounts
• It will process more than 8 crore transactions per day.

The merged SBI, will create a banking behemoth not only in India but enters the league of first 50 banks of the world and most probably the with the largest customer base than anybody else. Being such a giant entity SBI has smoothly accomplished the post-merger integration process which is really a commendable achievement for the Bank and the country as well.