Cabinet clears merger of SBICI with SBI

“In the overall analysis, continuation of SBICI in its present form would not create a substantial organisation with a separate niche,” information and broadcasting minister Ambika Soni told reporters after a Cabinet meeting

New Delhi: The government today approved merger of State Bank of India Commercial and International Bank (SBICI) with its parent bank State Bank of India (SBI), reports PTI.

SBICI, with two branches, is a wholly owned subsidiary of SBI and functions as a private sector bank offering an array of financial products and services.

“It’s performance over the period of its existence has not been consistent. It has not paid any dividend since its inception... In the overall analysis, continuation of SBICI in its present form would not create a substantial organisation with a separate niche,” information and broadcasting minister Ambika Soni told reporters after a Cabinet meeting here.

So also as an independent bank, SBICI has had to maintain a full-fledged, elaborate administrative setup to conform to regulatory requirements, she said, adding that the cost of maintaining such a structure is disproportionate to the level of operations of the SBICI.

The proposed merger will help in maintaining the administrative structure of SBICI as both its branches in Mumbai will be easily absorbed in the operations of the parent entity, she said.

While no present beneficiary of its parent SBI would be affected, the number of clients of SBICI will have access to the bigger network of SBI, she said.

SBICI was set up in 1994 after taking over the Indian operations of the erstwhile Bank of Credit & Commerce International (BCCI), which went into liquidation in 1991.

It’s net worth stood at Rs128.74 crore on the capital base of Rs100 crore. It had total business (deposits and advances) of less than Rs700 crore, with a return on asset of 0.49%.

As per Reserve Bank of India (RBI) guidelines, the minister said, for ownership in private sector bank, the bank’s capital had to be raised to Rs300 crore. The existing business model of SBICI and the returns generated by it over the years do not justify capital infusion, she said.

As of March 2011, SBICI earned a net profit of Rs4.21 crore. SBICI’s capital adequacy ratio (CAR) stood at 28.16% at the end of March 2011.

The board of SBI had cleared amalgamation of SBICI with itself in 2008.

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