SBI to absorb 6 associates by Mar ’09

Nod for ‘bullet’ merger on January 25, State Bank of Saurashtra will cease to exist on that date and Personnel issues most complicated

MUMBAI: Last Thursday morning, when the managing directors of the six associates of the State Bank of India (SBI) went into a huddle at Nariman Point, the central office of India’s largest lender, the agenda was clear.

SBI chairman O P Bhatt, who had convened the meeting, wanted nothing less than a “bullet” merger — all the six associates, three of which are listed entities, should be fused into the mothership in one shot, before March 31, 2009.

He was insistent because separate integration exercises — as was done in the case of State Bank of Saurashtra, which ceases to be an entity on January 26, 2008, — would be extremely cumbersome, gargantuan and mind-numbing considering the complexity of manoeuvres needed to keep the 3.3 lakh combined employees happy.

The boards of the SBI and the six associates will now hold a meeting on January 25 to give their in-principle nod to the merger.

The finance ministry and the Reserve Bank of India are expected to give their green signals.
The goal is to have a common balance-sheet as on March 31, 2009, said an SBI official in the know.

That’s important because India will open its doors fully to foreign banks by then. The size of operations of the foreign banks could dwarf the domestic players, which is why the government has been at pains to encourage consolidation.

While the State Bank of Saurashtra’s financials will be integrated into the SBI numbers for the current fiscal ending March 31, 2008, integrating those of the other six by March 2009 will be no mean task, say sources.

At the basic level, integration is expected to take at least two years, they said.
The most contentious issue in the mega-merger will be human resources.

An informal agreement, said sources, is on inducting every associate staff in the same grade in SBI.
But doing so would mean rubbing the SBI employees the wrong way.

This is because, for example, a general manager in SBI, though far less powerful than his peer in the State Bank of Hyderabad, is on a comparatively higher perch.

Also, it takes an assistant general manager 8 to 10 years to become a deputy general manager in SBI. In associate banks, it is far faster, so technically, an AGM from an associate is likely to be junior than his SBI counterpart.

“So mapping between grades will be an issue, and a via media will have to be found,” said a source in the know.

Already, the All India State Bank Officer’s Federation has called the decision of the board to meet on January 25, to consider the merger, is quite unilateral.

“The federation along with the UFBU and State Bank of India Staff Federation will meet on January 3, where we will discuss the merger issue and the future course of the protest,” its general secretary,  G D Nadaf, told PTI on Tuesday.

Promotions could also generate friction. If the choice is between an SBI staffer and an associate employee, if the SBI employee is promoted, there could be “apartheid issues”, said an State Bank of Bikaner & Jaipur staffer, who did not wish to be named. 

Analysts said the option for the SBI would be to set up promotion quotas.

Here’s a look at the other issues that the big merger will spawn:

Technology: Accounting will be manageable as all the associates are on the core banking technology platform, but, interestingly, not all the branches of the SBI are hooked up. Branch code rationalisation will be a crucial step to be executed concurrently.

Branch rationalisation: Mumbai’s Nariman Point alone has branches of all the seven associate banks of SBI, apart from 4-5 branches of SBI itself. Rationalisation, therefore, is an imperative.

Client rationalisation: One company can be a client of all the seven banks — there are many instances of this, according to SBI sources —  so sifting and sorting this would be among the early objectives.

The honchos: While integration in the lower cadres will not be too much of a problem, at the higher levels, there could be headaches. With a stream of deputy managing directors that SBI will be left with, the bank may opt to make them heads of various circles, thereby upgrading the position because currently, chief general managers head circles at SBI.

Intra-circle benefits: While SBI will gain in some, there won’t be much benefits in others. For example, the State Bank of Travancore has 550-odd branches in Kerala, while SBI’s Kerala circle has just about 150 branches. In the case of Hyderabad, however, both SBI and the State Bank of Hyderabad have huge set-ups, so there is unlikely to be a great differential.

Unions:Those at associates will be emasculated; but there could be an associate banks’ union set up to oversee integration issues in the initial years.

Transfers: Staff from associates may have to be given an SBI circle of their choice so that integration becomes easier.

Staff benefits: All associate employees will all three employment benefits. Till now they had a choice of only two from gratuity, pension and provident fund. Interestingly, the managing directors of all associate banks, who will retire in the next two to three years, will benefit the most since they, too, get the third benefit.

Medical expenses: These are also a little more liberal in the SBI than at associates.

SBI general manager G Jeevandas has already been appointed to oversee integration issues.

For the integration of State Bank of Saurashtra, a team of a dozen-odd SBS officers and their SBI counterparts were formed to integrate work. They are currently operating out of the central office in Mumbai.