The Cabinet has approved the merger of five associate banks, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala with State Bank of India (SBI), paving the way for the first such wide-scale consolidation exercise to create a banking behemoth.

“The Cabinet had earlier (in June 2016) in-principle cleared the (merger) proposal. It had gone to the boards of various banks which have granted the approvals. The recommendations of the boards were considered today and the Cabinet cleared the proposal,” finance minister Arun Jaitley said after the Cabinet meeting.

“With this merger, the SBI, with all these five subsidiaries merging in it, will also become a very large bank, not merely from a domestic point of view but actually a global player in its very size,” the minister said.

The Cabinet, chaired by Prime Minister Narendra Modi, has approved the introduction of a Bill in Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956.

This is touted as one of the biggest decisions in the banking sector since the nationalisation move in the 1970s. The combined entity was estimated to have an asset book of around Rs 37 lakh crore.

By Premji