SBI merger gets going, finally

Pending reforms in the banking sector, held up due to opposition from the Left parties, got a leg up on Thursday with the Union Cabinet's decision to issue an executive order to effect the merger of State Bank of Saurashtra (SBS) with its parent State Bank of India (SBI). The government is likely to issue the order within two-three days, a senior government official said. "The State Bank of Saurashtra will cease to exist after the notification is issued to sanction the merger," the official added. The merger will also set the stage for SBI to merge its other subsidiaries. India's largest commercial bank intends to first merge the three unlisted associate banks, starting with SBS, before merging the remaining four associates. State Bank of Hyderabad and State Bank of Patiala are the other unlisted associate banks. SBI has made it clear that the SBS merger will be the test case. Although a year has passed since the boards of SBI and SBS cleared the merger, its implementation was delayed due to opposition from the Left and employees' unions. Another Bill to amend the Banking Regulation Act, 1949, is also expected to be cleared by Parliament during in the monsoon session. It will enable foreign shareholders to exercise voting rights to the extent of shareholding in Indian private banks. After the executive order is issued, SBI will start integrating the business and manpower of SBS with itself. A Bill will be introduced in the Monsoon session to repeal State Bank of Saurashtra Act, 1950, as the bank was created by an Act of the legislature. The merger would enable SBI to upscale in terms of foot print, manpower and other resources to face global competition. In another decision, the Cabinet approved amendments to the State Bank of India Act, 1955, to redefine the role of elected directors in the board of the bank, following its ownership transfer from Reserve Bank of India to the government of India. The amendments would bring the operations of the SBI and its associate banks in tune with the changed scenario and modern business practices. By Ms.Bobby Aanand, Metropolitan Jury.

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