NEW DELHI Prime Minister Narendra Modi's cabinet approved on Wednesday State Bank of India's (SBI) takeover of several subsidiaries, a government official said, in a first move to consolidate the country's struggling public sector banks.
As earlier proposed, SBI was to take over five units that had been run at arms-length, as well as state-run Bharatiya Mahila Bank, a bank for women set up in 2013.
"The cabinet has cleared SBI's acquisition of subsidiary banks," the official, who did not wish to be named, said.
Policymakers want to recapitalise and consolidate India's state-run banks so that they can extend fresh credit and help drive an investment-led recovery in Asia's third-largest economy that is now being buoyed by state and private consumption.
India's 27 public sector banks account for 70 percent of its banking sector assets, as well as the lion's share of the country's $120 billion in troubled assets.
SBI Chairman Arundhati Bhattacharya said the merger would help the country's largest lender by assets expand scale and cut expenses through synergies.
"While the network of SBI would stand to increase, its reach would multiply. One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base," she said in an emailed statement.
SBI's board had already approved the takeover of State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore and State Bank of Travancore, as well as Bharatiya Mahila Bank.
Shares in all the listed units rallied by between 19 and 20 percent in trading on the National Stock Exchange in Mumbai on Wednesday.
(Reporting by Nigam Prusty; Additional Reporting by Himank Sharma; Writing by Douglas Busvine; Editing by Malini Menon, Muralikumar Anantharaman and Adrian Croft)
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Updated Date: Jun 15, 2016 19:39 PM