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From the last few years Banking Industry is being
integrated to chop the benefits of merger and acquisition. Bank in general
terms is referred to as a financial institution which accepts deposits from the
public and provides loans to the needy and it also creates credit creation. It
plays its main role in economic growth, capital formation, balanced regional
development, and development of trade and industries. In the recent times banking
sector has faced many changes in terms of regulation and structure. So for
changing in structure, banks have adopted many strategies. One of the
profitable strategy is Merger and Acquisition. Merger of State Bank of India
with its five associate banks namely; State Bank of Bikaner and Jaipur, State
Bank of Hyderabad, State Bank of Mysore, State Bank of Patialaand State Bank of
Travancore, is the mega merger in the history of Indian banking business. State
Bank of India, the country’s largest lender, in August 2016, approved the
merger of its operation.SBI’schief Arundhati Bhattacharya said “We are quite
ready and as soon as the government notifies the final order, we will be ready
to kick it off.”It
took place on 1st April 2017, when State Bank of India operated as
‘One Bank’ for all its associate banks. After this merger, SBI is set to be
among the top 50 large banks of the world. State Bank of India 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.HISTORYState Bank of India is an Indian multinational,
public sector banking and financial services company. It is a government owned
corporation with its headquarters in Mumbai, Maharashtra. It is not the first
time when SBI has merged with its associate banks. Earlier it has merged with
its associate banks in 2008 and in 2010. On 13 August, 2008, it merged with its
associate,State Bank of Saurashtra, the smallest of the seven associates and on
26 August, 2010 State Bank of Indore, the largest of the SBI’s six associate
bank subsidiaries, merged into SBI.In fact, State Bank of India came into existence by
the merger of three presidency banks namely; Bank of Bengal, Bank of Bombay and
Bank of Madras. The Bank of Calcutta was founded on 2nd June 1806.
It was the first bank of India and was renamed Bank of Bengal on 2nd
January 1809. Bank of Bombay was established, pursuant to a charter of the
British East India Company, on 15th April 1840. The Bank of Madras
was established on 1st July 1843 through the amalgamation of number
of existing regional banks and headquartered in Madras now Chennai. These
three presidency banks received the exclusive right to issue paper currency
till 1861 and then taken over by Government of India by Paper Currency Act on
27th January 1921 to form Imperial Bank of India. Subsequently the
Reserve Bank of India, in the year 1955, acquired a controlling interest in the
Imperial Bank of India and Imperial Bank of India was renamed on 30th
April 1955 as the State Bank of India. In 1959 the government passed the SBI Subsidiary
Bank Act, this made SBI subsidiaries of eight. In 1963 SBI merged State Bank
of Jaipur and State Bank of Bikaner. On April 1st, 2017, it was
wonderful decision taken by government of India to merge the India’s biggest
bank with its associate banks. With this merger, the State Bank of India will
enter the league of top 50 global banks with a Balance Sheet size of Rupees 33
trillion, 277000 employees, 420 million customers and more than 24000 branches
decrease the unhealthy competition among Public Sector Banks PSBs.Ø  To
focus on defaulters, many people had availed multiple finances. Through this
mega merger, they can be brought under one roof.Ø  To
compliance the BASEL III norms, as per changing environment due to emergence of
new area.Ø  To
get enter in the league of top 50 large banks of the world.Ø  To
reduce the cost of operation.Ø  For
expansion of banking business.Ø  To
increase the market share. Now it has increase in market share from 17% to 22%.Ø  For
mutual benefits parent and target banks.Ø  For
improving the product and providing large product at one place.Ø  Technical
inefficiency is also major reason of merger. The scale of inefficiency is more
in case of small banks. Hence merger would be good.Ø  Bad
performance of banking sector.IMPACT
OF MERGERAs per Arundhati Bhattacharya, SBI
Chairperson–“The merger of State Bank of India
and its associate banks is win-win for both.”The merger of five associate banks
and BhartiyaMahila Bank BMB with SBI is a step towards creating fewer but
much larger banks. The merged entity began operation with deposit base of more
than Rupees 26 lakh crore and asset size of Rupees 41lakh crore after merger.
Integration of treasuries of associate banks with the treasury of SBI will
bring in substantial cost saving and synergy in treasury operations. Getting
more technology – savvy, SBI is the first bank to launch digital banking
outlets – sbINTOUCH branches at various locations in India. We can see number
of impacts of SBI’s merger on those elements who are related with banks either
directly or indirectly. Some of these are-ON STATE BANK OF INDIA-Ø  Banks
can slowly transform themselves into global banks.Ø  Control
on defaulters became easy for bank because they come under one roof.Ø  Decrease
the unhealthy competition going on even among public sector banks as of now.Ø  Achievement
of greater recognition in global market.Ø  Saving
of crores of rupees by synergy operation, scale of economy, and established of
different higher post.Ø  Burden
of weak bank associate banks will transferred to the bigger bank SBI. So
non-performing assets NPA of associate banks will be the NPA of State Bank of
India. As it creates extra burden on employee.Ø  It
is difficult to manage all the branches effectively for SBI.ON ASSOCIATE BANKS-Ø  After
merger associate banks will have All India Bank Services.Ø  Now
it will be easy for associate banks to manage liquidity either for short term
or for long term because they are part of giant bank of India. Thus, they will
not be forced to resort to overnight borrowings in call money market and from
RBI under Liquidity Adjustment Facility LAF and Marginal Standing Facility
is loopholes of merger of SBI with its associates that some employees will lose
their seniority and may not get promotion after merger.Ø  It
is also difficult for all the associate banks to make one bank of India because
of different cultures. In India, there are number of states and all of them
have different cultures. So make balance among them is difficult task for SBI
and its associate banks.Ø  After
merger all associate banks will be the global bank.Ø  Shut
down almost half the offices of the associate banks, including the head offices
of three of them.ON CUSTOMERS-Ø  There
is limit for sanctioning loan on banks but with large bank, the amount of
delegation for more to get loan sanction.Ø  Now
the customers can use number of ATMs under the same logo i.e. SBI.Ø  Customer
services will be advanced by using high technology.Ø  Customers
will have access to fewer banks offering them wider range of products at a
lower cost.ON GOVERNMENT-Ø  Burden
of Central Government to recapitalize the Public Sector Banks PSBs again and
again will come down.Ø  By
using high technology, the focus is given on digitalization which creates
another new problem that is unemployment.CONCLUSION-

If we see overall impact of this
mega merger, it is good for parent bank, associate banks, economy, customers
and government. It is great achievement for SBI that it has completed the
merger integration in 48 hours. Now bank has more than 740 million accounts and
Bank is able to handle 15000 transactions per second and process 8 crore
transactions per day. Now the State Bank of India is ready to enter in the
league of top 30 largest bank of the world which is going to give an
international image to SBI. No doubt, it is win-win decision but SBI has to
give focus on the negative impact of merger like, problems of customers faced
by them after merger, problems of employees cultural, promotional,
geographical. Even it is of a temporary nature which can easily be ceased and
can bereapedfor more better result. The earning capacity of the SBI after
merger has down but the investor should not lose the hope by this big decision
as it will give the positive result in coming future.Thus, it can be said that it
is a good step of Government of India to merge the SBI with its associates
which is beneficial for both the Indian banking industry as well as Indian

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