State Bank of India [Get Quote] plans to merge all the associate banks with itself by March 2009. This step is to prepare the bank to face the intensely competitive banking environment in India, which is likely to see greater room for international players post April 2009.

The proposal for merger of State Bank of [Get Quote] Saurashtra (SBS) with SBI will go before the Union cabinet, which is expected to give its nod soon.

 "Once we get the cabinet nod for merger of State Bank of Hyderabad (SBH), it will set the ball rolling for the merger of the other associate banks," SBI chairman O P Bhatt said.

Both the award and supervisory cadre association at SBS have favoured the merger with SBI. "The issue of consolidation of associate banks was taken up only by the boards of SBI and SBH. The boards of other banks have not been sounded about the merger plans," Bhatt said. The respective boards are likely to meet in January 2008 to dwell upon the merger proposal.

Once the SBI-SBH merger is through, the consolidation of other entities should not take long as most of the ground work has been done and only the execution is left. "It has to happen before March 2009," the chairman said.

The associate banks have together posted a year-on-year growth of 16.85 per cent in net profit at the end of September 2007. While the aggregate deposits grew by 20.71 per cent, the advances rose by 26.84 per cent.

They command a market share of 7.33 per cent in deposits and 7.68 per cent in advances. The capital adequacy of associate banks taken together stood at 12.44 per cent. Their gross non-performing assets were 1.91 per cent (2.34 per cent in September 2006).

Dwelling on the credit growth of SBI in the third quarter, Bhatt said, "It will grow at 25-26 per cent (year-on-year) against 30 per cent last year. The growth picked up in November and December. The agriculture and SME segments have shown robust credit demand. The deposit growth is between 20-22 per cent.

The country's largest commercial bank at the end of September had posted 26.21 per cent (Y-o-Y) growth in advances at Rs 3,63,591 crore (Rs 3,635.91 billion) and 23.1 per cent in deposits at Rs 4,84,114 crore (Rs 4,841.14 billion).