SBI plans to merge an associate bank by early next fiscal

New Delhi: Country's largest lender State Bank of India (SBI) on Tuesday indicated merging either State Bank of Patiala or State Bank of Hyderabad with itself by early next fiscal as part of the consolidation process, which started in 2008.

"It (merger) is an ongoing process, may be in another year from now. It (merger) may not be this financial year. But the preparatory process would start. May be consummate the deal sometime early next year," SBI Chairman Pratip Chaudhuri told reporters, after PSU bankers' meeting with the Finance Ministry.

"Next would be possibly one which is fully-owned (associate bank)," he said.

There are five associate banks of SBI. Two of them are fully owned - State Bank of Patiala and State Bank of Hyderabad, while remaining three are not 100 per cent owned State Bank of Mysore, State Bank of Travancore and State Bank of Bikaner and Jaipur (SBBJ).

These three entities are also listed at stock exchanges.

SBI undertook first ever amalgamation of its associate State Bank of Saurashtra in 2008, followed by State Bank of Indore in August last year.

On interest rates revision Chaudhuri said: "Immediately we are not contemplating a hike as of now".

Asked if RBI raises policy rates by 25 basis points on May 3 annual policy, he said, "if 25 basis points happens it does not hit us immediately...but it puts upward pressure on interest rate, cost of funding goes up then only we look at reviewing interest rates".

"It will depend. We will have to assess the impact of the policy on flow of deposits. Automatically, if deposit rates do not go up, so there may not be case for hike in base rate immediately," he said.

He said, "if, we keep hiking base rate, we will be out of the market. There is urgency and requirement for us that we remain competitive".

Interest rate from March 31 onwards have slightly soften and now the banks are not desperate and not bidding for bulk deposits, he said.

Chaudhuri also said the bank is in talks with the government to participate in the proposed infrastructure debt fund.

Asked about acquisition plan in Indonesia, Chaudhuri said "it is not working out very well".

"The prices we have to pay are very high, it is three times the book," he said, adding, it is looking at expansion in Australia by setting up a subsidiary.

Source: Financial Express