The much-awaited consolidation of the large number of public sector banks has moved a step forward with State Bank of India (SBI), the country’s biggest lender, in the process of merging State Bank of Indore (SBoI), its smallest subsidiary, with itself. SBI has 98.05% stake in SBoI.

As per the process, SBI has decided the share swap ratio where for every 100 shares held by a shareholder in SBoI, the shareholder will get 34 shares of SBI.

At a consolidated level, it wouldn’t change the overall balance sheet of SBI much as SBoI is already a subsidiary and its financials are captured in consolidated numbers of SBI. But, it would expand the reach of SBI brand and the bank could reap benefits of integration in operations. SBoI has 500 branches currently as against SBI’s over 11,000 branches across the country.

SBI is already a giant having ended with assets of Rs 9.65 lakh crore ($ 207 billion) for the year ended March’09 as against Rs 33,075 crore ($ 7.1 billion) of State Bank of Indore. SBoI reported net profit of Rs 279 crore for 2008-09 as compared to over Rs 9,000 crore of SBI( at a standalone level).

This is the second subsidiary of SBI to be merged with the parent. SBI had merged State Bank of Saurashtra in August last year with itself. Other subsidiaries of SBI which could be potential merger target in the future include State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, State Bank of Hyderabad and State Bank of Bikaner and Jaipur.

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