The board of State Bank of India (SBI) on Thursday cleared the proposed merger of five associate banks. The merger associates include Bharatiya Mahila Bank (BMB) too. This step will bring SBI closer to creating the first Indian lender which ranks among the world’s top 50.
The proposed merger of SBI and its subsidiaries would create a banking behemoth with a balance sheet size of Rs.37 trillion, SBI chairman Arundhati Bhattacharya said in May. That would be more than five times the Rs.7.2 trillion balance sheet size of India’s second largest lender, ICICI Bank Ltd.
SBI was ranked 52 in the world in terms of assets in 2015, according to Bloomberg, and a merger will see it break into the top 50. SBI had seven associates, of which it merged two—State Bank of Saurashtra and State Bank of Indore—with itself over the last 10 years.
India’s largest lender also approved the share swap ratio for merging with three associates—State Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore (SBM) and State Bank of Travancore (SBT) along with BMB. Swap ratios for State Bank of Hyderabad and State Bank of Patiala were not announced.
According to the plan, investors in SBBJ holding 10 shares will also get 28 shares of SBI. Investors in SBM and SBT holding 10 shares will get 22 SBI shares each. Shareholders in BMB with 100 crore equity shares will get 44.2 million shares of SBI.
The merger plan is subject to approvals from the Reserve Bank of India (RBI) and the government of India, SBI said in a notification to stock exchanges. However the merger of SBI with its associate banks and BMB, seen as the potential take-off point for consolidation of India’s banking industry.