SBI merges six banks with itself to create a behemoth: Here's how it will impact you

The State Bank of India, the country's largest bank, just became even larger. On 1 April, all its five associate banks – State Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala (SBP), and State Bank of Hyderabad (SBH) – and Bharatiya Mahila Bank merged with itself to create a giant of a bank.

The merged entity will have total asset size of Rs 28,62,514 crore, deposit base of Rs 22,39,899 crore and total loan book of Rs 18,61,175 crore. it will have 23,314 branches and 283,753 staff (see the table, all numbers as of 31 March 2016).


The bank, with a customer base of 370 million, will be one among the top 50 banks globally.

In creating such a behemoth, here's what the customers can expect:



What will happen to loan rates?

For those who have taken loans from the associate banks, the merger is likely to be good news. This is because their interest rates on loans will get aligned with that of SBI. Remember, the bank offers one of the lowest rates in the country - be it MCLR or base rate. “As a result of the merger the borrowers can expect to get lower rates of interest at the time of renewal or at the time of origination as SBIs rates are obviously the best in the market,” said SBI chairman Arundhati Bhattacharya to The Economic Times in an interview. Explaining the rationale behind the claim, she said the cost of funds for associates was more than that that of SBI's, which was why the their customers were being charged higher rates.

As of 4 April, SBI is offering 8.6 percent for women borrowers under MCLR and 8.65 percent for others. For associate banks, the rates higher by 20-50 bps, said the ET report.

Its base rate stands at 9.1 percent.

So, the merger is likely to be benificial for borrowers.

SBI and associates - Apr 3, 2017

Given the mega-size of the merger, will there be technological hiccups for the customers?

Very unlikely. The reason is that the banks are already almost seamlessly merged as far as technology is concerned. The merger, by that sense, is just a formality. Bhattacharya told PTI in an interview that the bank created a CBS (core banking solution) database of about 500 tera byte, which is likely to be the biggest Oracle database in the world.

"We've accomplished it in the past 48 hours. I don't think anybody in the world would have attempted and completed such a mass mission, a six-way merger of such a magnitude," she has been quoted as saying.

What about the various fees that the bank started charging on 1 April?

These charges will be applicable to all customers, including those of the associates. Here's a recap of the banks charges: All customers need to maintain a monthly average balance (MAB) from 1 April otherwise the bank will impose a penalty. The balance requirement for the customers in six metros is Rs 5,000, for those in urban areas is Rs 3,000, for semi-urban Rs 2,000 and rural Rs 1,000. failure to maintain the average balance in accounts will attract penalty of up to Rs 100 plus service tax.

In metros, the charge will be Rs 100 plus service tax, if the balance falls below 75 percent of the MAB of Rs 5,000. If the shortfall is 50 percent or less of the MAB, then the bank will charge Rs 50 plus service tax.

The charges too vary according to the location of bank. It is minimum in case of rural branches.

For current accounts for all segments, the MAB is Rs 10,000 and the penalty for non-maintenance is Rs 500 plus service tax.

The bank permits savings bank account holders to deposit cash three times a month free of charges and levy Rs 50 plus service tax on every transaction beyond that.

Withdrawal of cash from ATMs will attract a charge of up to Rs 20 if the number of transactions exceeds three from other banks' ATMs in a month and Rs 10 for more than five withdrawals from SBI ATMs.

However, SBI will not levy any charge on withdrawals from its own ATMs if the balance exceeds Rs 25,000. In case of other banks' ATM there will be no charge if the balance exceeds Rs 1 lakh.

Data from Kishor Kadam

Updated Date: Apr 04, 2017 13:08 PM

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