Merger with SBI will reduce rates for our customers: SBBJ MD Jyoti Ghosh

JAIPUR: In about six to nine months, curtains will be drawn on a princely past that State Bank of Bikaner and Jaipur (SBBJ) carried to this day. After being acquired by ICICI Bank, Bank of Rajasthan lost its existence in 2010. Now, the last standing home-grown bank SBBJ will also cease to exist after its merger with SBI. SBBJ traces its genesis to 1963 when State Bank of Bikaner and State Bank of Jaipur, established in 1943 and 1944 respectively, were merged.While the state governments in Kerala and Telangana have opposed the merger of State Bank of Travancore (SBT) and State Bank of Hyderabad (SBH) respectively, Rajasthan has maintained a silence, hinting at its support for the merger. But Jyoti Ghosh, managing director of SBBJ told TOI in an interview that the merger is the best thing that can happen to Indian banking industry and the customers of the bank will benefit from lower interests of SBI. He also allayed the concerns of the employees. Excerpts…
At a time when large Public Sector Banks are bleeding heavily, SBBJ posted a net profit of Rs 851 crore for 2015-16 with net profit growing by 9.49%. What was the need for this merger?
SBBJ has weathered the current crisis because of its prudent large-ticket advances and focus on balance sheet management and settling 99,000 stressed accounts with a recovery of Rs 385 crore in 2015-16. But the merger of SBI’s associates with itself has been there for a long time. During the past two years, it gained pace. The reason behind this is that India is now a global economy. Our growth rate is the highest in the world. We need to have a few high-class and large-size financial institutions. Out of the 10 largest banks in the world, Chinese lenders occupy the top three positions. Small is definitely beautiful but then sometimes being too small constraints you with reduced cutting-edge in competition.
State governments in Kerala and Telangana, where SBT and SBH headquartered respectively, have opposed the merger. SBBJ also pays various taxes to the Centre, a portion which comes back to Rajasthan. But the state has been silent on the merger. Your comments.
I don’t understand protests for the sake of protests. If there were any genuine issues, the government would have flagged them. I think the state government is comfortable over the fact that SBI will take over SBBJ in a seamless manner. I will not comment on the issue further. But I can say that our shareholders were very happy. SBBJ is literally doing niche banking in Rajasthan. Other private and public sector banks are coming in with lot more aggressiveness. That’s why it is probably the right time to merge. With our clout in Rajasthan, we can survive seven or 10 years more. But to ward off competition, SBI will be quite helpful. I think it’s a win-win deal for everybody.
SBBJ gets more than Rs 2,200 crore business from Rajasthan government. Do you see any chances of these accounts going to other banks post-merger?
I don’t envisage any problem there. SBI is adept at handling Central and state government accounts in many states. Even in Rajasthan it manages 5-6 accounts. The team, which will be retained here for post-merger synchronization with various corporates and government departments, will be highly functional. The same thing was done in the cases of State Bank of Indore and State Bank of Saurashtra.
What would be the impact of the merger on the customers of SBBJ?
After the merger, the marginal cost of lending rates of SBI which is 9.20% (one year term) against SBBJ’s 9.55% will trigger in. Customers will have a distinct advantage of 35 basis points. They will also have the benefit of many foreign branches of SBI where letter of credit and other export and import businesses can be routed at much competitive prices and shorter down-time.
Unions are protesting against the merger even though SBI has already clarified that there will be no layoffs. What are their concerns?
Human Resource is probably the most important aspect of any merger and acquisition. All the associate banks have a culture, which is state oriented. But there is a clear cut thinking that at least for one year, the incumbent people will not be disturbed. The associations will be called for discussions to arrive at a consensus on terms and conditions. Promotion is another issue that needs to be thrashed out. Because in smaller banks’ promotion periods are shorter compared to bigger ones. We have already flagged this issue. In addition, some staff churning will happen as rationalization of branches takes place. For example, in Connaught Place in New Delhi where SBI has three branches, most of the associates have their branches as well. There won’t be so many branches after the merger. But it would not have any impact on the manpower because public sector banks don’t fire employees. The surplus staff will be deployed in other operations.