SBI, associate banks see market gain after government approves merger

Shares of SBI and its associates ended the day with as much as 5% gains on Thursday after the Cabinet approved their merger, a step aimed at strengthening the sector through consolidation of public banks.

The scrip of State Bank of Mysore jumped 4.66%, State Bank of Travancore gained 4.21%, State Bank of Bikaner rose by 3.48% and SBI was up 0.65% on BSE. During the day, these stock went up by up to 13.5%. Seeking to create a global-sized bank, the Cabinet on Wednesday gave the go-ahead to the merger plan of SBI and its five associates. However, no decision was taken on the proposal to merge the Bharatiya Mahila Bank with SBI.

The merger of associate banks is likely to result in recurring savings, estimated at more than Rs 1,000 crore in the first year, through a combination of enhanced operational efficiency and reduced cost of funds, an official statement said. The two unlisted associate banks which will be merged with SBI are State Bank of Patiala (SBP) and State Bank of Hyderabad (SBH).