There might be delay in the merger of the five associate banks with the State Bank of India due to huge costs, mainly relating to employee benefits and provisioning for non-performing assets, sources said.
The bank would have to keep aside around Rs 10,000 crore for merger of all the associate banks with itself. The amount of capital required for merger would depend on the size and business of the individual bank, according to Mr. S. Vishvanathan, Managing Director of SBI Associates and Subsidiaries division.
"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," Mr. Vishvanathan said.
State Bank of Mysore, State Bank of Bikaner and Jaipur, and State Bank of Travancore are listed entities with non promoter holding ranging between 7.7 and 25 per cent; while State Bank of Hyderabad and State Bank of Patiala are wholly owned. It might take time for the merger process in case of listed entities.
Country's largest lender had set aside around Rs 1,500-2,000 crore each during the previous mergers of State Bank of Saurashtra (August 2008) and State Bank of Indore (August 2010).
"We will take a non-discriminatory approach while deciding on the sequencing of mergers," Mr. Vishvanathan said.