After merger with associates, SBI to prune cost-to-income ratio to 46%

State Bank of India (SBI) will, after the merger of its associates with itself, cut the cost-to-income ratio to 46 per cent in the medium term through expenditure savings.

Dinesh Khara, managing director (associates and subsidiaries), SBI, said the ratio for the lender was 49.5 per cent while for the associates it was 52.4 per cent. There will be savings on costs via branch rationalisation. The country’s largest lender will have to improve productivity by using the experience of professionals with the associate banks. The thrust will be on increasing fees by selling financial products such as mutual funds, insurance policies and investment advisory. This will help to improve the ratio and returns in the medium term, Khara told Business Standard on Monday.

At a media briefing on the merger process, SBI Chairman Arundhati Bhattacharya said the group would transfer data for the associates over the weekend and the process would be completed by May 27. The associate banks had made additional provisions of Rs 8,600 crore for non-performing assets before integration. “Increase in NPAs is not necessary (post-merger) as associate banks had a number of accounts which were standard, but those were already NPAs with us. So, to that extent, those things have been put on the same platform.” Only 2,800 employees of the five associates have applied for voluntary retirement scheme (VRS), of the 12,000 who are eligible for it, Bhattacharya added.

The group began to tighten provisioning norms for the associate banks in early 2016-17, helping to bring them on a par with the parent.

Five associate banks — State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Patiala — and Bharatiya Mahila Bank merged with SBI on April 1. 

The merged entity will have a deposit base of more than Rs 26 lakh crore and advances of Rs 18.50 lakh crore.

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