MUMBAI: State Bank of India (SBI), the country’s largest public sector lender, said on Wednesday that it would discontinue products being offered by all its five associate banks from April 1. It, however, clarified that existing customers would not face any disruption in service following the merger of SBI and associate banks.
“We have done data analysis to see which products were offering better features and if we could incorporate them in our product range. But, no new offerings in that particular products (those offered by associate banks) will be made available after April 1,” Dinesh Kumar Khara, managing director of SBI, told Express.
He added that all the banks were offering almost similar products under different names and hence their discontinuation might not cause inconvenience. Interestingly, some associate banks offer attractive rates. For instance, SBH and State Bank of Travancore have lower interest rate on gold loans at 10.50 and 8.95 per cent, respectively, against SBI’s 11.05 per cent.
“There were different interest rates, as associate banks had their own asset liability committees to decide interest rates, based on the demand and territory they were operating in,” he said, adding that the analysis covered over hundreds of products the associate banks are offering.
The legal process for the merger begins on April, 1 followed by the audit of balance sheets and data integration, which is expected to be completed by the end of May. SBI will be massively rationalising its administrative structure, shutting down regional offices and branches to avoid duplication. The move is expected to save resources and improve the cost to income ratio, an important metric that determines the profitability of the bank.
According to Khara, SBI has a cost-to-income ratio of 52 per cent; for associate banks, it is 49 per cent. Post-merger, this is expected to settle at around 50 per cent. “We are anticipating a 100 bps change in treasury gains in a short-term after the merger. In the medium-term, the gains could be as much as 300 bps,” he said.
Though the bank gave assurances of no job losses, the picture looks bleak on the recruitment side. “Hiring plans are dependent on the bank’s growth and there might be a slight reduction in the total hiring,” he said.