Cabinet to talk SBS-SBI merger this Thursday

The proposal for merger of State Bank of Saurashtra (SBS) with the State Bank of India (SBI) will be taken up by the Cabinet on January 10. “Once the Cabinet approves the terms and conditions for the SBS merger with SBI, it will set the tone for merger of the rest of the associates with the parent. Internally, it is envisaged that the merger with all the subsidiaries will be completed by the end of 2008. There are HR issues but they are not intractable,” a top official of the SBI group said. The merger of SBS with SBI will be completed on January 27. Meanwhile, it is expected that top officials from the six associate banks will meet on January 25 to pass an in-principle resolution for merger with SBI. The SBI-associates merger will entail providing for pension benefits for all employees. At present, employees have only two benefits: gratuity, and pension or provident fund. However, SBI provides all three benefits to its employees. “There is unlikely to be a major burden on the parent bank to provide the third benefit. It is a windfall for the associates’ employees who will now enjoy the third benefit,” a top official in the SBI group said. SBI will have to factor in changes in the accounting standards (AS-15) that mandate a provision for pension liabilities going forward. Banks have sought to stagger the provision over a period of five years starting April 2008. It’s not clear who among the unions will head the resolution of industrial disputes post-merger.