RBI opens doors to M&As for foreign banks in India

Governor Rajan has provided an option to convert or operate through branches for those present before 2010, but has provided incentives to convert with a prescribed capital of Rs 500 crore."Wholly-owned subsidiaries may be permitted, subject to regulatory approvals and such conditions as may be prescribed, to enter into M&A transactions with any private sector bank in India, subject to the overall foreign investment limit of 74%," said the proposed framework.The principles of reciprocity and single mode of presence will determine the need for a foreign bank to locally incorporate, but many of the parameters are not provided in black and white...Read more >> Click here

Allowing bank mergers would boost local consolidation

The finance ministry and the Reserve Bank of India (RBI) are working on new guidelines that will ease mergers and acquisitions (M&As) among banks, which would pave the way for the creation of stronger entities through consolidation and for foreign banks to strengthen their local presence. "We are in discussions with the RBI. The idea is to make the norms easier and remove the irritants, which lead to delay in such transactions after regulatory approvals have been obtained," a finance ministry official said. RBI governor Raghuram Rajan had, last month in Washington, said that the banking regulator was planning a significant change in the rules to allow foreign banks to have a much bigger presence in India than they currently have and that they may even be allowed to acquire domestic lenders. 

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Basel III norms prevented merging subsidiary: Chaudhuri

Former SBI Chairman Pratip Chaudhuri has said the nation's largest lender would have completed the process of merging a subsidiary but for the huge capital requirement due to the Basel III norms. "We have decided to merge one more subsidiary which we are pretty positive but because of Basel III impact, it is (delayed)," Chaudhuri, who left SBI last month, said here.SBI had a shortage of capital but now is better placed to merge one of its subsidiaries, he said, adding that in the recent past it was able to merge State Bank of Indore and State Bank of Saurashtra. Chaudhuri specifically pointed to steep salary hike which will have to be given to the employees of the merging subsidiary, which eats into capital base of the parent. Depending on the bank to be merged, it will take either Rs 1,000 crore or up to Rs 2,000 crore for the merger.

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Chaudhuri leaves SBI merger for successor

State Bank of India chairman Pratip Chaudhuri, retiring by the end of this month, has left the decision on more merger of associate banks to his successor. Earlier, SBI was to announce in this month the name of the associate bank it would be next merging with itself.

"I think it is right for me to leave that (name of the bank) decision to my successor," Chaudhuri told Business Standard.. "I would have liked to merge at least one bank but the capital position was so precarious that I couldn't," he said. He said as there would be a shuffle of top management jobs after his retirement, it was appropriate to leave the decision to his successor.

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SBI says decision on merger of subsidiary in two days

A top State Bank of India official today said the name of the suitable associate bank to be merged with the parent bank will be submitted to the management in the next two days. "In the next two days, we will be informing the chairman of the name of the entity most suitable for the merger," managing director S Vishwanathan told reporters on the sidelines of an event here this evening. 

Vishwanathan, who looks after SBIBSE 1.51 %associates and subsidiaries, said by the end of September, he hopes that some decision to be made, after which it will go for regulatory approvals.  He, however, declined to comment when asked if a listed or an unlisted bank will be merged.

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All subsidiaries will be merged with SBI in next 10 years: Chairman

The State Bank of India has chalked out plans to merge all its subsidiaries with itself in the next 10 years. India’s largest bank will merge one subsidiary every two years. “It will take two years to digest a merger, as we have to work on branch rationalisation and various issues,” said Pratip Chaudhuri, Chairman, SBI.

Following a merger, there will be certain practical issues, he said. For instance, “State Bank of Hyderabad has got 1,200 branches in Andhra Pradesh alone, while SBI has 1,300 branches there. You can’t have 2,500 branches under one local head office as it will become unmanageable. So, we need two-three local head offices. All these need to be worked out,” he said. However, in the next 10 years, all the five subsidiaries — State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of Patiala — will be merged with SBI, he added.

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Merger by the end of Sept - which one ? State Bank of Patiala or State Bank of Mysore !!!

 State Bank of IndiaBSE -3.41 %   today said it will announce the name of its associate   bank   for merger  by the end of next month, and would prefer an associate which is weak on deposit front. 

"We are in advanced stages of making up our mind on what to do about this (merger). We will be         making an announcement about one bank before September-end," Managing Director     and Group Executive for Subsidiaries and Associates S Vishwanathan     told reporters at the first quarter   earnings announcement. Chairman     Pratip Chaudhuri said the preference will be to pick an associate bank that is weak on the deposits front. 

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Telangana formation hits SBI’s merger plans

The proposed creation of Telangana State has thrown a spanner in State Bank of India’s plans for merger of its largest associate, State Bank of Hyderabad, with itself.

SBI Chairman Pratip Chaudhury had earlier indicated that a decision on merging one of its associate banks would be taken after July. “An internal committee to evaluate the possible candidate for merger has been appointed and it is expected to submit its report anytime now,” a top executive of SBI told Business Line.

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Telangana issue blocks merger of regional rural banks in AP

The proposed merger of regional rural banks (RRBs) in Andhra Pradesh has hit a temporary road block due to the prevailing uncertainty over the creation of separate state of Telangana. It was earlier proposed to merge Chaitanya Godavari Grammena Bank (CGGB) with Saptagiri Grameena Bank sponsored by Indian Bank.

Similarly, Deccan Grammena Bank, which is sponsored by State Bank of Hyderabad, is proposed to be merged with Andhra Pradesh Grameena Vikas Bank for which State Bank of India is the sponsor. RRBs are spread across several districts and regions of the State.

“The amalgamation process, which was actively initiated about three months ago, is now halted as some modifications and clarifications have been sought by the State Government in view of the much-talked about formation of Telangana State,” a senior official told Business Line.

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Formation of Kerala Gramin Bank notified following merger of two RRBs

The Finance Ministry has notified the formation of Kerala Gramin Bank by amalgamating South and North Malabar Gramin Banks, the two regional rural banks in the State.

The newly formed bank comes into existence with effect from July 8, according to a Government of India Extraordinary Gazette Notification.

The command area of the new bank will be the combined operational area of the two erstwhile RRBs (all the 14 districts of the State).

The headquarters of the new bank will be at Malappuram and it is sponsored by Canara Bank.

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One out of 5 associate banks can be merged in FY'14: SBI chief Pratip Chaudhuri

 State Bank of India (SBI) today said it is in a position to merge one of the five associate banks in the current fiscal.  "Right now we are in a position to merge one of the subsidiaries in the current fiscal. Which one will depend on the committee report. It can happen in the third or the fourth quarter,"SBIBSE -4.58 % Chairman Pratip Chaudhuri said here. SBI has formed a a high-powered committee headed by SBI Managing Director S Vishwanathan to prepare a report on merger of associate banks. 

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SBI needs capital up to Rs 3,000 cr for subsidiary’s merger

State Bank of India (SBI) today said it will require up to Rs 3,000 crore capital to merge one of its associate banks.

SBI will need Rs 1,000-3,000 crore in capital if it were to merge one of its subsidiaries with itself, its Chairman Pratip Chaudhuri said. He was speaking to shareholders at the bank’s annual general meeting here. The bank has appointed a committee headed by Managing Director S Vishwanath to look into the aspect of merging one of the five subsidiaries, he said. The subsidiary to be merged with SBI has not been identified yet.

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Staff benefit costs may delay merger of associate banks with SBI - Vishvanathan, MD

Huge costs, particularly relating to employee benefits and provisioning for non-performing assets, might delay the merger of the five associate banks with State Bank of India, sources said.

According to S. Vishvanathan, Managing Director of SBI Associates and Subsidiaries division, the bank would have to fork out around Rs 10,000 crore for merger of all the associate banks with itself. The amount of capital required would depend on the size and business of the individual bank.

“Cost, expenses and employee perquisites are different and we need to bring them on equal footing (with SBI). For instance, there are three terminal benefits in SBI as compared to two in case of associate banks. Capital will be required to create a corpus,” Vishvanathan  told Business Line.

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Associate banks merger can start by September: SBI chief

State Bank of India (SBI) today said the proposed merger of its five associate banks with itself could start by September after a high-powered committee submits its report on the same.

The high-powered committee headed by SBI Managing Director, S Vishwanathan would furnish its report by July-August, and later based on the report the merger process could start by September, SBI Chairman Pratip Choudhuri said here.

State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore would be the target associate banks for merger, Chaudhuri said.

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Mergers ??? - Associate bank to be merged would be decided soon: Pratip Chaudhari

State Bank of IndiaBSE -1.45 % Chairman PratipChaudharitoday said one of its associate banks would be taken up for merger during this quarter.  Talking to reporters after inaugurating the State of Bank of Travancore's (SBT's) community service activities here, he said it took two years for stabilisation after the merger of Bank of Saurashtra. 

Discussions with banks and government was progressing on identifying the bank for merger, he said, adding that "we have not yet zeroed down any particular name so far".
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Canara Bank, BoI merge RRBs in Uttar Pradesh

Canara Bank has informed the exchanges that it has amalgamated regional rural banks - Shreyas Gramin Bank sponsored by it with Aryavart Kshetriya Gramin Bank sponsored by Bank of India. Both the RRBs are located in Uttar Pradesh.

The ministry of finance (MoF) had envisaged amalgamation geographically contiguous RRBs sponsored by different bank within a state with single sponsor bank which will help in optimising the use of modern technology.

After the merger, the RRB is called Gramin Bank of Aryavart with its head office at Lucknow under the sponsorship of Bank of India.

Source : Business Line 20th May

RBI approves Surat bank's merger with Mehsana bank

The Reserve Bank of India (RBI) has approved the merger of Surat Nagrik Sahkari Bank with Mehsana Urban Cooperative Bank, giving relief to former's 44,000 account holders and depositors in the city.

The account holders and depositors of Surat Nagrik Sahkari Bank were on the tenterhooks after the bank was placed under directions by theRBI under section 25(a) of the Banking Regulation Act, 1949 on March 1.

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Merger with SBI strong catalyst for SBT and SBBJ

Re-surfacing of the buzz regarding consolidation of Indian public sector banks in recent times merits a re-look at the merger of State Bank of India’s (SBI) subsidiaries with itself. The consolidation will catapult SBI as one of the world’s top 10 largest banks. SBI has completed merger of two of its subsidiaries, namely State Bank of Indore and State Bank of Saurashtra earlier and now has five remaining subsidiaries.

Of these, three are listed i.e. State Bank of Travancore (SBT), State Bank of Bikaner and Jaipur (SBBJ) and  and State Bank of Mysore. Notably, these banks are trading at a sharp discount vis-à-vis their own historical average valuations as well as those of comparable peers such as Bank of Maharashtra, Andhra Bank, Dena Bank, amongst others. 

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Govt exempts M&A involving loss-making banks from CCI purview

The government has exempted merger and takeover plans for loss-making and failing banks from the purview of fair trade regulator Competition Commission for a period of five years. Mergers & Acquisitions (M&As) happening in the country have to get clearance from the Competition Commission of India (CCI), which keeps a tab on anti-competitive practices across sectors.

The Corporate Affairs Ministry in a notification has said that loss making and failing banks have been exempted from the purview of the CCI. The exemption would be for a period of five years, according to the notification issued in January. Finance Ministry had sought an exemption for mergers and acquisitions of loss-making and failing banks.

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