The Union law ministry has given its green signal to the finance ministry on the proposed merger of Bhavnagar-based State Bank of Saurashtra (SBS) with the country?s largest bank, State Bank of India (SBI). The finance ministry would soon issue an administrative order giving the go-ahead for the merger process, which would then require the Cabinet?s approval, an official said.
SBS, which has a major presence in Gujarat, is one of the seven associate banks?and a wholly-owned subsidiary?of SBI. Once the merger is through, it would be the first of its kind in public sector banking. The boards of both the banks and the Reserve Bank of India have already cleared the merger, despite opposition from a group of bank employees.
Sources said a Bill to enable the merger would be put up before Parliament in the Monsoon session. The Bill would include the repeal of the State Bank of Saurashtra Act, 1950, and changes to the State Bank of India (Subsidiary Banks) Act, 1959.
While it was initially held that both these changes would have to be done sequentially, which would have delayed the merger, a quaint clause in the SBI subsidiary banks law has enabled the law ministry to move the repeal and the amendments in a single Bill.
Section 65 of SBI (Subsidiary Banks) Act allows for the SBI Act, 1955, to prevail in such matters. The SBI Act empowers the bank to commence talks for acquiring another bank?s business and assets after getting a nod from the central government and RBI. It also allows the finance ministry to give its assent to a merger in writing.