Giving India a global-scale bank

The proposed merger of the State Bank of India with its five associate banks and the Bharatiya Mahila Bank is a long-delayed and welcome move on the path to banking consolidation, especially among state-owned lenders. SBI’s takeover of its five subsidiaries and the three-year-old niche provider of banking services for women will, once consummated, vault the merged entity higher up the rankings ladder on the global banking stage. The resultant benefits to the lender and the economy are evident. The increased balance sheet size will enable the bank to obtain better pricing on both internationally sourced funds and domestic deposits, thus helping it lower lending rates and improve profitability. The added branch network and customer base will also help it expand reach and enable the lender to rationalise resources across the board. There are various estimates of the potential cost savings, with one projection putting the possible reduction in cost-to-income ratio at 1 percentage point. The lender’s increased size, in terms of assets, will also give it the requisite muscle to take on new competition from larger banking entities that are likely to be created by consolidation in the banking industry. The Bank Board Bureau has been tasked with overseeing a restructuring among public sector banks in keeping with the government’s aim of reducing the number of state-owned lenders and improving their financial health.

The merger will, however, pose its unique set of challenges. The scale of the task is substantial given the total staff strength. With more than two lakh employees, the parent will add close to one-fifth that number by way of additions posing a huge test in terms of integration of roles, salary, perquisite and pension structures and, no less importantly, work cultures. Much of the opposition from the bank unions stems from concerns relating to these issues. Customers of the smaller, community or regional market-focussed subsidiaries such as the State Bank of Travancore may be discomfited by having to deal with a larger, more impersonal lender, one where the size of their accounts may be viewed as comparatively marginal. For regulators, the new entity will throw up interesting oversight issues. Already identified by the Reserve Bank of India as the country’s key Domestic Systemically Important Bank, or too big to fail in simple terms, the enlarged SBI’s capital adequacy norms will climb and may require far more by way of infusion of funds than the Centre has committed so far. But such challenges must not be used to undermine the obvious benefits of merger.

Difficult words with definitions:

	Difficult word/phrase	Easier replacement
1	consolidation	grouping together
2	subsidiaries	smaller companies (owned by larger companies)
3	niche	special/limited
4	consummated	perfected/completed
5	vault	(room with strong walls and a strong door for storing money, jewellery, etc.)
6	entity	thing/business
7	global	worldwide
8	economy	(process of people making, selling, and buying things)
9	evident	obvious
10	balance sheet	(money-based records of a company)
11	obtain	get
12	internationally	(in other countries)
13	funds	money
14	thus	this way
15	profitability	a money-making state
16	rationalise	(give reasons for something)
17	resources	useful things/valuable supplies
18	across the board	(including everything and everyone)
19	various	different
20	estimates	guesses (of a number)
21	potential	possible
22	assets	valuable things
23	requisite	necessary
24	entities	things/businesses
25	tasked with	given the job of
26	restructuring	breaking down and rebuilding
27	public sector	(government-run services and their employees)
28	financial	(related to managing money)
29	pose	present/ask/stand in a showy and fake way
30	unique	(like nothing else in the world)
31	task	job
32	substantial	big
33	employees	workers
34	posing	(presenting oneself/asking/standing in a showy and fake way)
35	integration	(combination of different races, cultures, nationalities, etc. working and living together)
36	salary	(money paid for working)
37	perquisite	benefit
38	pension	(money paid regularly after retirement)
39	opposition	(fighting force/bad feelings)
40	stems from	comes from/is caused by
41	regional	(related to a large area)
42	discomfited	upset
43	impersonal	(emotionally cool and not friendly)
44	comparatively	(compared to something else)
45	marginal	not important
46	regulators	(devices that control things/groups of people that ensure rules are followed)
47	systemic	(related to the deep-down, basic way something works)
48	adequacy	(how good (or good enough) something is)
49	norms	normal behaviours
50	infusion of	mixture of
51	undermine	interfere with

[Editorial from the hindu]

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