MUMBAI, Feb 4: Drawing curtains to the three year-old controversy, the State Bank of India has finally merged its treasury division - dealing in the call and gilts market - with the foreign exchange cell. The integrated treasury is reporting to the bank's chief financial officer (CFO) P K Bhattachargee.State Bank chairman MS Verma has confirmed the development. "There is no alternative but to go for integrated treasury operations. We have merged all treasury operations and are in the process of setting up a unified dealing room," a senior State Bank executive said. The bank has been able to successfully combat the recent liquidity crisis by virtue of the integrated treasury, sources said. "We sold off over $400 million to generate rupee resources overnight. Unless you have one dealing room which keeps a tab on the entire corpus of dollar, pound sterling, deutshe mark and rupee resources, it is impossible to fight the liquidity crunch at a short notice," the SBI executive said.
However, the State Bankmanagement's move is likely to snowball into a major political issue in West Bengal with state chief minister Jyoti Basu planning to take up the matter with prime minister IK Gujaral and Reserve Bank of India governor Bimal Jalan. The trade unions are opposing the move tooth and nail for fear of being redeployed and Calcutta losing the "prestigious dealing room business" to Mumbai.
"The chief dealer of the Calcutta dealing room has recently been transferred. A few more dealers will be tranferred in course of time. There will not be any mass transfer and the Calcutta office will continue to do the reconciliation work and the corrrespondent banking job," sources said.
According to senior State Bank executives, integrated treasury operations are imperative in view of the impending capital account convertibility (CAC). "The forex market today is very different from what it was three years ago. We are now dealing with options, swaps, derivatives... We cannot adopt a fragmented approach if we want to stand upto competition," sources said.
At least three nationalised banks - Bank of India, Bank of Baroda and Corporation Bank - are in the process of integrating their treasury operations. "Even before the global consultancy firm McKinsy recommended in favour of a unified treasury, we were planning to have one dealing room in Mumbai. From Calcutta, one cannot keep a tab on FII inflows," sources said.
The merger of forex and domestic treasuries marks the end of a bitter fight between the SBI management and the trade unions over the last few years. Former SBI chairman P G Kakodkar could not merge the dealing rooms in face of stiff opposition from the trade unions.
Insight
:unnecessary fuss by TUs
The fact that the SBI's forex and money market dealing was separate all these years shows the clout which unions wield in public sector banks. The treasury function obviously has to be integrated given the interlinkages between the forex and money markets. Separating the two dealing functions is akin toone's left hand not knowing what one's right hand is doing.
In any case, it is necessary only for the dealing function to be located in Mumbai - the other departments of SBI's foreign department, such as reconciliation and correspondent banking, can continue at Calcutta. The dealing room requires only a few officials, and it is difficult to appreciate what all the fuss made by the unions is about. Perhaps the only ones to lose will be the Calcutta forex brokers.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
