The proposed merger of State Bank of Hyderabad (SBH), one of the associate banks of State Bank of India (SBI), with the country’s largest lender has come under the spotlight after a non-governmental organisation (NGO) filed a public interest litigation (PIL) in the Bombay High Court alleging SBI has not followed the listing norms laid down by the Securities and Exchange Board of India (SEBI) while pursuing the merger.
In the PIL, Banking Education Training and Research Academy (BETRA) has alleged that the merger process is carried out in a non-transparent and unprofessional manner.
“It is necessary for the listed entity to submit documents such as draft scheme of arrangement/amalgamation/merger/reconstruction/reduction of capital to the stock exchange along with a valuation report and auditor’s certificates under the SEBI’s listing obligations and disclosure requirements regulation 2015,” the NGO argued in the PIL. “These rules are flouted by the bank as such an important decision, being taken as a table agenda without making any disclosure, is not in the larger public interest,” it said.
On November 28, the division bench of Justice RM Borde and Justice Sangitrao S Patil of Aurangabad bench of the Bombay High Court observed that, since the matter is related to larger public interest, they will not pass any ruling before hearing all the parties. The court directed SBI and other respondents to file their reply by 19 December 2016.
The PIL has argued that SBH is fundamentally strong considering parameters such as deposits, priority sector lending, agricultural advances and housing as well as educational loans, and was formed with a regional focus.
“Performance of SBH is better than SBI with whom the proposal is moved for its merger,” said the PIL. “The petitioner has an apprehension that it would not be in the interest of public at large to merge a strong regional bank with another bank which is comparatively not performing in better manner considering these parameters,” it added.
Devidas Tuljapurkar, chairman of BETRA Trust said, “SBH operates mainly in the state of Telangana and the Marathwada region of Maharashtra, which are mainly drought-prone areas with limited access to the banking and financial inclusion. If this merger takes place, many of the branches of the regional bank will be shut down in the name of operational efficiency which will hurt the interest of the people in the area.”
Email queries sent to SBI and SBH did not elicit any response till the time of filing this report.
SBI has been planning to merger its six associate banks with itself. In August, the bank approved the merger of three of its associate banks—State Bank of Bikaner and Jaipur (SBBJ), State Bank of Mysore (SBM) and the State Bank of Travancore (SBT)—and Bharatiya Mahila Bank Ltd (BMBL) with itself. SBH and State Bank of Patiala were not part of that proposal.
Once its associate banks are merged with itself, SBI will become one of the largest banks globally, with an asset base of Rs 37 trillion (over $555 billion), 22,500 branches and 58,000 ATMs and over 50 crore customers. Currently, SBI has close to 16,500 branches, including 191 foreign offices spread across 36 countries.
SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with SBI.
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