Merger in Indian public sector banks is the most talked about topic these days. If the vision of the Finance Minister becomes a reality we are not far from that day when mergers will actually take place. This article focuses on the feasibility of mergers within the State Bank Group. It begins with the evolution of the country's biggest bank, speaks about its financial position and the outcome of the merged entity. At the same time, it also indicates the hindrances in the path of the merger.
Merger musings are the order of the day. Till the deliberations come true, they are mere illusions. The talk about the merger of State Bank of India(SBI) with its seven associates is not of recent origin. A decade ago, McKinsey & Co, the group of professionals, advocated that the parent bank either should sell some of the associate banks or merge with them. Now, this is the time for the Bank to exhibit its potential to extort value from its reserves in its associate banks.
A merger, in its essence, must guarantee its aims and ambitions. There needs to be an addition in its contribution to national wealth, cost reduction and increased value to shareholders in the form of augmented profits. The government also feels that the mantra for banking reforms should be "consolidation, competition and convergence", which will enable banks to become much stronger, bigger and globally competitive. The government wants the Indian banking industry to be globally competitive by 2010. The most effective and efficient way to capture a major share in the domestic and international market is through mergers and acquisitions. The merger of the State Bank of India with its associates is in conformity with this mantra. |
