Gears up to merge State Bank of Indore with itself in the next twelve months.

State Bank of India (SBI) Chairman O P Bhatt received the final go-ahead from the government on the proposal to merge State Bank of Saurashtra (SBS) with the parent bank on August 13 last year.

Exactly a month later, SBI integrated the systems of the two banks. It was an overnight operation and next morning, when people logged in, no one even realised that we had moved to a common platform, said Jeevan Das Narayan, general manager in the SBIs mergers and acquisitions (M&A) cell.

Experience such as this has given the M&A cell the confidence to complete a second merger with State Bank of Indore -- within the next 12 months.

And, sitting in her 18th floor office at the SBI headquarters, Bharati Rao, advisor in-charge of the banks M&A cell, is keeping a close watch on the feedback her team is receiving on the banks proposal to acquire State Bank of Indore, its smallest associate bank.

On the banks discussion board, the feedback ranges from an optimistic Jai ho to Yeh to hona hi tha. Though the employees union has given a strike call after the two boards approved the plan 10 days ago, Rao isnt too perturbed.

After all, the merger will bring with it pension and better healthcare benefits for the over 6,000 State Bank of Indore employees. But its not just about better facilities. A big benefit is that post-merger, State Bank of Indore employees can also work for a large financial conglomerate that has interests in insurance, mutual fund and pension, said Rao.

Just like in the SBS case, top executives from SBI and State Bank of Indore will shortly hold consultations with employees and clients of the Bhopal-headquartered entity to explain the rationale and benefits of the merger.

Most customers do not like dislocation. We need to tell them that they will have access to all products and services that they use at present and may get some more. A lot of times pricing at SBI is much better, said Rao, who was earlier deputy managing director at SBI.

The strategy is simple. While the large clients would be common, some of the smaller ones would be serviced by the mid-corporate group. In case of SBS, the only dislocation for clients has been that some of them are now being serviced by SBIs Ahmedabad office, instead of the SBS head office at Bhavnagar. What helped was the fact that senior SBI executives led by Bhatt met clients to allay whatever fears they had.

But the biggest focus is employees. After all, it is the staff that makes a merger a success or a failure. Again, it is the SBS experience that SBI is banking on, albeit with minor variations.

To start with, some executives from State Bank of Indore are going to join Raos team to ensure a smooth merger. In addition, the entire staff would be trained in batches to ensure problem-free system integration. In case of SBS, SBI spent six months training almost the entire 7,000 employees of the former.

Integration of employees is something that Raos team worked on very closely since the last public sector bank merger of New Bank of India with Punjab National Bank is still causing heartburns to the employees of both the banks, who are still bitter about delay in promotion.

So, SBI looked at the data on promotions over a five-year period, worked on nearly half-a-dozen models, hired a consultant and then finalised the policy. And, to ward off any problems later, SBI even got legal opinion to endorse the move.

At a smaller bank, the chances of promotion are higher. After all, there were only 2,000 officers at SBS, over 90 per cent of whom were in ranks up to AGM. At SBI, there were nearly 50,000 officers. While all SBS officers have joined at the same level and their seniority has not been affected, the promotion policy envisages that it will take one year extra for an SBS officer to get a promotion. So, if an SBI officer is eligible for promotion in four years, it will take a former SBS officer five years.

The other area of focus was to ensure that there was no disturbance at the branch level. At the head office in Bhavnagar, the three zonal offices in Gujarat and at the two regional offices in Mumbai and Delhi, the clerical staff was redeployed. But some 500 officers were shifted to the Ahmedabad branch. In case of the zonal and regional offices, it was ensured that officers up to the level of chief manager were not moved outside the state.

A senior executive of SBS, who is now part of the SBI set-up, said that the policy has worked out well, at least so far. State Bank of Indore employees know exactly what was given to the SBS staff. So, that part is clear now, said Rao.

While she is unwilling to discuss the plan for the remaining five associate banks, SBIs policies have been thought out carefully over the last two years or so. The thought was, lets give it a try. If it works out, its wonderful, if it does not, its okay, said a senior SBI executive.

A merger makes sense since there is too much of duplication. For instance, there are many locations where an SBI branch is competing with one of its associates in mobilising deposits and giving out loans.

All the seven banks have an establishment cost, which can be one and we can work in unison. They have strong presence in some areas which we can make use of, Rao said.

If SBI can merge all the associate banks, it would be able to increase its branch network by nearly 40 per cent, while the profits would be 30 per cent extra. And, to top it up, there would be significant savings. The SBS merger has already resulted in savings of a few hundred crore though no firm assessment has been made, bank executives said.

Given the common ownership, common technology platform and a common chairman, that should not be tough At the front-end, there was no change for the customer -- the logo is the same, though there were some changes in the stationery and the boards at the branches, Rao added.

So, what after State Bank of Indore? No one at SBI is willing to comment. But what makes SBIs moves unique is the fact that none of the other public sector banks have moved beyond stating their support for consolidation. Maybe they could draw upon SBIs experience to pull off mergers, whenever they finalise one.