SBI To Merge Subisaries OR Not

SBI associate banks rally on merger buzz-Business Standard-
( My views on Merger Plan given Below )

Three associate banks of State Bank of India jumped by 8.1% to 14.62% at 14:06 IST on BSE on reports that SBI is planning to merge its three listed and two unlisted associate banks with itself.
Meanwhile, the BSE Sensex was down 18118 points, or 0.71%, to 25,402.51

India's largest commercial bank by branch network State Bank of India (SBI) rose 0.76% to Rs 2,685. The stock hit high of Rs 2,731.05 and low of Rs 2,662.25 so far during the day.
 
State Bank of Mysore advanced 14.62% to Rs 618.35 after hitting 52-week high of Rs 647.40 in intraday trade.
 
State Bank of Travancore surged 8.53% to Rs 654.05 after hitting 52-week high of Rs 662.90 in intraday trade.
 
State Bank of Bikaner and Jaipur jumped 8.1% to Rs 617.75 after hitting 52-week high of Rs 660 in intraday trade.
 
State Bank of Mysore had outperformed the market over the past one month till 10 June 2014, surging 33.16% compared with the Sensex's 11.26% rise. The scrip had also outperformed the market in past one quarter, jumping 37.56% as against Sensex's 16.64% rise

State Bank of Bikaner and Jaipur had outperformed the market over the past one month till 10 June 2014, surging 56.97% compared with the Sensex's 11.26% rise. The scrip had also outperformed the market in past one quarter, jumping 95.3% as against Sensex's 16.64% rise.

State Bank of Travancore had outperformed the market over the past one month till 10 June 2014, surging 49% compared with the Sensex's 11.26% rise. The scrip had also outperformed the market in past one quarter, jumping 63.08% as against Sensex's 16.64% rise.

Shares of three listed associate banks of SBI rallied on reports that SBI is planning to merge its three listed and two unlisted associate banks with itself. A newspaper quoted SBI Chairman Arundhati Bhattacharya as saying that the timing is very conducive now to look merging the associate banks.
As at 31 March 2014, SBI owned 75.07% stake in State Bank of Bikaner and Jaipur, 78.91% in State Bank of Travancore and 90% in State Bank of Mysore. State Bank of Hyderabad and State Bank of Patiala are the other two unlisted associates of the SBI.

Meanwhile, with reference to the news item appearing in a leading financial daily titled "Banking Behemoth: SBI to Merge 5 Arms with itself", SBI during market hours today, 11 June 2014 clarified that no such proposal has been formally taken up for approval. While the Bank has always had plans to consider merger of the associate banks, eventually, a position which has been stated by the bank from time to time since long, the matter had not been under active consideration for quite some time, SBI said. Going forward, the bank may examine the merger options afresh, when considered appropriate, but preparation of a possible roadmap would take a few months, SBI added.
Meanwhile, in an another clarification, State Bank of Bikaner and Jaipur during market hours today, 11 June 2014 clarified that no such negotiations are taking place at the moment and there is no such information that has not been announced to the Exchanges, which could explain the aforesaid movement in the trading.

Link Business Standard

My Opinion Given a few days ago are resubmitted below

How To Cure Sick Banks

Ministry of Finance under newly formed Government under the leadership of Mr. Narendra Modi and under the guidance of Finance Minister Mr. Arun Jaitley has once again racked the issue of merger and consolidation to save ailing banks .

It is well known that MOF has  been floating the  idea of merger of public sector banks since long , say for several years to create strong bank which can compete with foreign banks , which can provide big loans to infrastructure companies and power companies and which can absorb shock of global recession .

Merger plan was best suited to Finance Minister Mr. P Chidambram who as a person was a clever person and who   knows how to hide the ill effects of political exploitation of public sector banks carried out by his party since eighties in the name of social welfare or financial exclusion or poverty alleviation. Two decades ago, three banks namely United Bank, UCo Bank and Indian Banks were identified as weak banks and merger plan was suggested by leaders who damaged these banks. They however got success in hiding the malady under the carpet by treating all bad assets as good assets and by only setting up one committee or the other. 

Banks which were really bad in eighties and nineties were falsely and fraudulently projected as strong bank by manipulating their balance sheet just like what promoters of Satyam computers did to attract investors. But now those weak banks are resurfacing as bad banks and many other banks have also become victim of wrong policies of the government or victim of good policies executed by bad persons.Banks Like SBI, PNB, Canara which were considered to be strongest bank among Public sector banks are also not falling in the category of weak banks .SBI has declared more than 5% of its assets ( in fact it is more than 20% ) as bad assets though the bank is still  considered as strongest bank .

Then India under the leadership of Manmohan Singh entered into an era of privatization and globalization and got added opportunity to misuse these banks for political gain. Now again position of many government banks have gone from bad to worse, gone beyond control and beyond repair. And therefore need of merger of weak banks has again been suggested by those clever politicians who are only responsible for the growing sickness in these banks.

In eighties Congress Party under the leadership of Janardan Pujari damaged these banks in the name of Loan Melas. After that banks were damaged by person like VP Singh in the name of Loan waiver and Compromise settlement with defaulters. Then in the name of globalization, persons like Manmohan Singh, P Chidambram, Pranab Mukherjee damaged the banks by building pressure on bankers for lending as per their whims and fancies without taking care of recovery and without caring for security of the assets. 

It is none other than the politicians who have damaged the fundamental of banking by promoting the culture of bribery and flattery in recruitment, promotion and posting. As a matter of fact, none of top banker takes interest in safety and security of banks,but  they take all adequate and absolutely full interest to serve their self interest and in keeping Finance Minister happy , in keeping political mentors happy and in keeping all their bosses happy. Top bankers have to indulge in bad practice to win the heart of politicians ruling this country for last ten years.

In public sector banks, majority of  officers work for the pleasure of top officials whereas in private banks they work sincerely and honestly for the growth of their banks. This is the root cause behind growing sickness in public sector banks. 

Culture of flattery and bribery propagated and advocated by politicians have infected deeply into blood of top officials of banks too which has resulted in bad culture in all banks and which has percolated down the line.  Undoubtedly ,it is this bad culture which in now appearing in the form of Rise IN Non Performing Assets (NPA) and Rise in Stressed assets or erosion in capital . 

Bank officers are ready to sacrifice interest of their bank to please not only minister and senior officials but all those who are friends, relatives and recommended persons of Ministers and Top Officials of various departments. This is why, neither RBI nor Government of India is that much worried to know that 15 to 20 of banks assets is stressed and almost all banks have lost their capital . Birds of same feather flock together and they remain united as leaders of UPA are united in protecting corrupt ministers and corrupt officials indulged in 2G, CWG, Coal Scam or any other big or small scam of the country.

Lacs of crores of public money is at stake and almost each bank needs thousands of crores of rupees as capital support to comply Basel III norms. It is unfortunate that no one has till date filed PIL to stop banks' journey from heaven to hell. None has taken interest to stop political exploitation of banks. None has taken sincere interest and initiative to stop corrupt practices going on unabated and unbridled in recruitment and promotion processes carried out  in these banks for decades and that too in the name of Merit oriented policies. Clever management of these banks do not allow even court cases filed against corruption to move and take a decisive turn.

When so called merit oriented recruitment and promotion policy implemented by top officials of the bank for last twenty years has fully damaged the basics of these banks, government is now left with has no option other than merging weak banks with a little bit stronger banks so that volume of bad debts could be concealed and image of these banks could be protected . They may however simple change the dress of these weak banks to look like gentleman . But the sickness has assumed the form of cancer and hence cannot be treated by changing the apparel or by changing the name of the bank only.Politicians can put carpet on malady for the time being but its stinking gas will explode sooner or the later.

If investors in banks become revolutionary and agitated, entire game plan of ministers and top bankers will be exposed before public just as CAG exposed misdeeds of politicians in 2G, CWG,Coal mining and Iron Mining scams and now ruling Congress Party is facing the consequences of their misdeeds in current Lok Sabha election. It is only investors who are not getting adequate dividend on money they invest. It is depositors who are not getting adequate return in form of interest because banks are forced to lend at lower rate of interest. And finally it is bank staff who are not getting respectable wage hike despite their hard work.