Want lower cost to income ratio for merged entity: SBI

Offers VRS to eligible employees, to incur its cost

With the merger of associate banks now formal, State Bank of India (SBI) is now aiming to bring down the cost to income ratio of the merged entity.

“The cost to income ratio for the main bank was 49%, whereas for the associate banks it was around 52%. The merged entity was having a cost to income ratio of 50% as on December. Going forward, our effort will be to bring down this 52% to 49%, and this will be our first goal,” SBI Managing Director (Associate and Subsidiaries) Dinesh Khara told Deccan Herald.

SBI, which has offered a voluntary retirment scheme (VRS) for employees of associate banks who have put in at least 20 years of service or 55 years of age, is aiming to recover the costs through rationalisation measures.

“We have offered VRS to employees of associate banks and it will remain open till April 5. Out of 70,000 employees, about 12,000 to 13,000 are eligible for availing the VRS. As of now, the numbers which we have received are much above our expectations,” Khara said.

“We expect the cost for the VRS to be around Rs 1,000-1,200 crore. But we feel that by virtue of the cost rationalisation that we are attempting, we should be able to recover it,” Khara added.

Khara also believes that the merger will help SBI borrow at much cheaper rates going forward.

“The ability of raising more resources at competitive price becomes very  evident with the merger. We have the benefit of now reaching out to global markets for raising resources at the most competitive price as we are among top 50 banks globally,” Khara said.

SBI merger good first step: Kamath
Veteran banker and New Development Bank (NDB) President K V Kamath has described the merger of SBI’s associate banks with the parent a “good first step”, saying there is scope for further consolidation as large banks are needed to cater to the growing economy.

“If you look at the size of our economy, we need a few more large banks. So clearly there is space for consolidation in the public sector and possibly in the private sector also because you need much larger banks to cater to this economy,” he said.