Kerala Assembly passes resolution against SBT-SBI merger

This blog had pointed to how Kerala govt did not like the State Bank of Travancore merger with SBI (some customers of other state banks too voiced their concerns). This trouble brewed when the govt had just announced such a proposal. Then the govt cleared it and one thought all noise is over. (BTW, here is history of these state banks as well).

But Kerala govt unlikely to let it go without a fight. Now the Kerala Assembly has passed a resolution opposing the merger:

The Kerala Legislative Assembly passed a resolution on Monday, against the merger of State Bank of Travancore (SBT) with State Bank of India, stating it would adversely affect the state’s economic growth.

The resolution, introduced by Chief Minister Pinarayi Vijayan, asked the Centre and Reserve Bank of India to rescind the decision to amalgamate SBT with State Bank of India (SBI). However, the lone Bhartiya Janta Party member in the House, O Rajagopal, opposed the resolution, saying it was with a political motive. The Congress and Left parties were opposing the merger because of their hatred towards the BJP-led government of Prime Minister Narendra Modi, he said.

The chief minister said people of the state viewed the merger development with anxiety. Speaking during the two-hour debate, Finance Minister T M Thomas Issac termed Rajgopal’s attitude ‘narrow minded’ and against the state’s interest.

The ruling CPI-M-led LDF and Congress-headed UDF supported the resolution, which pointed out that the merger was against the state’s interest. The resolution said SBT was the biggest bank in the state with 846 branches and Rs 8,000 crore of deposit. It said the Kerala government’s major transactions were also with the bank.

SBT’s agriculture development loan has played a key role in the economic growth of the state, the resolution added.

Hmmm..It will be interesting to look at the highlighted claim of the govt on how and whether SBT did play a key role in agri development of the region.

I don’t think with any other state bank, the govt is as involved. It looks as if the bank just moved from the erstwhile king to the government and the govt is opposing as the king would. With other state banks, there does not seem to be any such issue. Before we think this opposition is on account of privatisation which is expected from Kerala govt, this is hardly the case. The bank simply moves to SBI which is anything but a private player.

This blog now even more interested to understand the process and historical reasons for these State banks becoming SBI associates. One reason obvious is that with princely states joining the Indian state, role of their own sponsored bank did not make sense in the scheme of things. After all, these princely states became part of some or the other State within India. As banking was a Centre government subject, most likely these princely state sponsored banks went to the centre for management. The centre then probably just converted them into SBI associate banks. There was just once exception – Jammu and Kashmir Bank which was a state bank as well but maintained its independent identity as J&K adopted its own constitution.

It will be really exciting to understand the discussions and processes behind these movement of Princely banks. Even their organisational history before they became part of SBI associates club would be really interesting. They ran like central banks plus commercial bank of their respective kingdoms. But as most accepted the Indian currency (barring Hyderabad), they were not fully a central bank as they did not print their own currency. They were actually more like Presidency Banks post 1861 which ran currency minted by the government and also carried out both central bank and commercial bank functions like banker to the government, deposits mobilization from public, loans etc.

Within these state banks, some would have done the function really well and others not as well. What would be the reasons for same would be great to find out as well. The role of kingdoms in shaping banking activity is a fascinating piece of inquiry. We have so many such stories but no clue about most of them..

 

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