SBIn - the Ye(N) drops

Amongst the many last acts that the outgoing congress government did before the last elections was the announcement of the merger of SBIn and SBI. Under the grand scheme of things this innocuous thing actually was to wash away the various acts of omission and commision that was indulged in at the behest of the politicians by the erstwhile management of the SBIn. After all who will question what was a standard procedure to cut costs when a subsidiary is merged with its parent?

Now let us look at some of the actions that prompted this move.

1. this bank was the unofficial treasurer of the UPA government aka private banker.

2. main job during election to see that cash levels for party functionaries never run dry - this is where a bank comes in handy - a bank can always move large amounts of cash without questions and that too under protection!!

3. during the past 5 years the bank helped the UPA in moving vast amounts of money in and out of the country and across the length and breadth of the country through the extensive use of LC's, factoring, credit backed lending, derivatives, other non fund based limits etc. One just has to look at the long list of companies headquartered out of Indore that have suddenly made it BIG !! (the only previous parallel was when SBSaurashtra was merged with SBI - then too a lot of local companies made it BIG{ This is the TRUE trickle down effect!!} - but then thats a different story)

This is a dangerous trend as this the first time that a banking apparatus has been widely used for election purpose. Now under the guise of a slowdown in the economy it would be interesting to see how many of these companies that made it BIG ask for restructuring of loans/ credit limit expansions etc. Also what percentage of the provisions for bad debts by SBI in the next year BS result out of the loan portfolio carried over from SBIn.