"Consolidation is the need of the hour as several banks are not able to invest on technology upgradation, business processes and new products. Virtual merger is going on in the form of technology and treasury integration but legal merger will take a long time," A K Purwar, SBI chairman said.
SBI, apart from its own network of 10,000 branches, has seven associates -- State Bank of Patiala, State Bank of Indore, State Bank of Bikaner and Jaipur, State Bank of Sauranshtra, State Bank of Mysore, State Bank of Hyderabad and State Bank of Travancore.
Although the associate banks offers virtually the same products as SBI, they operate as separate physical entities. However, their technology platform and treasury operations have been integrated with SBI.
Referring to SBI's chain of 5,000 ATMs in the country, Purwar said with the establishment of ATM regime the major advantage to the banks was that deposits composition have started undergoing a change.
It is more beneficial to the low cost depositors. People are keeping lot of money in saving and current accounts so that they can transact at anytime, he said.
On the proposed cash withdrawal tax, Purwar indicated that it will encourage people to transact more in cheques rather than cash, which in turn discourage black money proliferation in the country.
"The withdrawal tax will encourage people to deposit and withdraw more money from the bank," he said after the IIM-I convocation ceremony.
"This will encourage companies withdrawing lakhs of rupees to pay salaries to workers to issue a salary cheque to be credited into the employees account. In fact it is one way of monetising everything," he said.
Referring to competition with private banks, Purwar said these banks have helped nationalised banks improve their services and efficiency "substantially".