The government on Thursday cleared the decks for the merger of State Bank of Saurashtra (SBS) with its parent bank State Bank of India (SBI). The government has decided to introduce a SBI (Subsidiary Banks) Amendment Bill, 2008 in Parliament for the merger.
The Bill is likely to be introduced in Parliament in the forthcoming monsson session. The Bill, when passed, will repeal the SBS Act, 1950, and make required amendments in the SBI (Subsidiary Banks) Act, 1959, to remove references to SBS wherever it occurs in the Act.
As reported by Financial Chronicle, the Union Cabinet on Thursday approved the merger to create a stronger entity to compete with private sector.
The approval for merger came within weeks after the Left withdrew support from the government. The proposal has drawn a lot of flak from bank unions since the boards of both the banks approved it in August last year. SBI employees have threatened to go on a nation-wide strike as they feel the merger will leave many jobless. The State Bank union is meeting in Patna on July 31 to decide the future course of action.
“The Cabinet gave its approval to issue an order sanctioning the scheme of acquisition of SBS by SBI, in terms of section 35(2) of the SBI Act, 1955,” information and broadcasting minister Priya Ranjan Dasmunsi said after a meeting of the Union Cabinet on Thursday.
He said the SBS-SBI merger would enable it to up-scale in terms of footprint, manpower and other resources. “It would also enable it to face competition arising from globalisation, apart from augmenting efficiency and enabling better management of risk,” he added.
The government will also amend SBI (Amendment) Bill, 2006 to redefine the powers of the Reserve Bank of India nominee director on the board of SBI. It will also amend SBI (Subsidiary Banks) Act, 1959, following the transfer of ownership of SBI from RBI to the centre. “The amendments will bring the operations of SBI and its subsidiaries in tune with the changed scenario and modern business practices,” Dasmunsi said.
The merger is part of the government’s efforts to consolidate banking sector. It will pave the way for merger of other State Bank associates with the parent bank. Other six State Bank associates are State Bank of Hyderabad, State Bank of Patiala, State Bank of Indore, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore.
SBS is the smallest among seven associates. The first three are more prone to merger as they are not listed, especially State Bank of Indore as it is the smallest by net worth after SBS. SBI chairman OP Bhatt had said that the merger process would be completed within three months after the government approval.