The State Bank of India (SBI) and State Bank of Saurashtra (SBS) merger is unlikely to take off at least till the general elections to be held in 2009. The reason is that the State Bank of Saurashtra Act needs to be repealed to carry on with the merger of SBS with the parent bank.

Sources said that this would mean that the entire process would require Parliament approval for which the matter would be first referred to the standing committee on finance.

?The standing committee would naturally take its own time to study the matter and this may take anywhere between eight to 10 months, which is the time of the Lok Sabha polls,? a source pointed out. The matter, as of now, has not even been approved by the Cabinet.

Meanwhile, representatives of the Left parties and trade unions in the banking industry have said that they would not allow any merger process to take off in the banking industry.

Though the boards of the two entities gave their in-principle approval for the merger in August 2007, the matter is yet to be taken up by the Cabinet.

The Union Forum of Banks Union has pointed out that the associate banks of SBI are separate legal entities and therefore an attempt to merge them would lead to major problems. SBI has a capital adequacy ratio of 12.3%. However, the marketshare of the country?s largest bank has declined steadily. Finance ministry officials said that in order to face competition from private sector and foreign banks, Indian banks need to merge to become stronger entities. CH Venkatachalam, convenor, UFBU told FE that merger of banks would actually mean closure of bank branches and this may prove to be a hurdle in going ahead with steps that are meant to expand financial inclusion.

?If SBI-SBS merger had gone ahead without any major hiccups, the other associate banks would have also been taken up for merger with the parent bank. However, now it seems that the plan would be put on the backburner,? a government source said.

With the Lok Sabha polls inching closer, the UPA would not like to take the Left parties head on, analysts said.