SBI rocks on Dalal Street: merger revitalises

The board of State Bank of India (SBI), has approved the merger of its associate banks, along with Bhartiya Mahila Bank. The share price of SBI has increased by 3.63 per cent on bourses in early trades; and is trading at Rs 256 on an intraday basis.

As per the approved merger ratios for each of the banks, the scheme provides for allotment as below:

28 equity shares of SBI for every 10 equity shares of State Bank of Bikaner and Jaipur.

22 equity shares of SBI for every 10 equity shares of State Bank of Mysore.

22 equity shares of SBI for every 10 equity shares of State Bank of Travancore. 

4,42,31,510 equity shares of SBI for every 100 crore equity shares of Bhartiya Mahila Bank.

The merger will add to the strength of SBI with assets of about Rs 23 lakh crore. SBI roughly comprises of one-fourth of the Indian banking system with an additional capital base of about Rs 4 lakh crore.

The cut-off date for merger ratios has been taken as May 16, 2016, considering the valuations at the time when the merger was announced. Post the merger, SBI will likely break into the list of the world's top 50 banks by asset size. Meanwhile, asset quality of SBI's associates has worsened as compared to SBI. Hence, after merger there may be rise in NPAs for the bank.