The State Bank of India (SBI) will issue 44.2 million shares to the government for one billion shares of Bharatiya Mahila Bank, which is a Government owned bank, which SBI will merge with itself. SBI will issue 28 shares of Rs 1 each for 10 shares of Rs 10 each for the State Bank of Bikaner and Jaipur, and 22 shares for 10 shares of the State Bank of Mysore. Likewise, shareholders of State Bank of Travancore (SBT) will also get 22 shares in SBI for every 10 shares held by them in SBT. The above banks are listed on the stock exchange.

The unlisted banks in which the SBI holds 99 per cent each – State Bank of Patiala and State Bank of Hyderabad – it would be a line-by-line merger. The shares held in these banks by SBI will stand cancelled after the merger. The RBI and the Government has to approve the proposal.

Swap ratio is slightly higher for State Bank of Mysore but it will not make any difference for others as SBI holds an overwhelming majority in them.

SBI has assets worth $550 billion and after consolidation this will improve the banks standing. The SBI Group controls 22 per cent of the Indian banking system. The five associate banks have a market share 5.30 per cent in deposits and 5.33 per cent in advances. Their cumulative net profit was Rs 1, 368.7 crore at end of March.

The challenges will be rationalization of branches, retail networks and employee integration of the SBI Group’s 22,000 branches, including SBI’s own 16,800. Integration of Corporate finance branches are easier because 60-70 per cent accounts are common.