The Indian Parliament on July 30, 2018 passed the State Banks (Repeal and Amendment) Bill, 2017 that merges the subsidiary banks with the State Bank of India (SBI).
The Bill was introduced in Lok Sabha by then Union Minister of Finance Arun Jaitley on July 21, 2017.
The merger of these subsidiary banks is already in effect from April 1, 2017. The merger was approved by the Union Government in February 2017.
Provisions of the Bill
The Bill seeks to repeal the State Bank of India (Subsidiary Banks) Act, 1959, the State Bank of Hyderabad Act, 1956. These Acts established the State Bank of Bikaner, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, and State Bank of Hyderabad, the subsidiaries of the SBI.
It amends the State Bank of India Act, 1955 to remove references related to subsidiary banks. These references include: (i) the definition of a subsidiary bank in the 1955 Act, and (ii) powers of SBI to act as an agent of the RBI for a subsidiary bank.
Why was there a need of this merger?
The merger of subsidiaries with the SBI is a part of the PSU Banks Consolidation Plan that was proposed by the Union Government in March 2016 at a congregation of bankers and government officials where various issues pertaining to banks were discussed. The move aims to stimulate the flow of credit to fuel private investment.
Significance of the merger
• With this merger, SBI will join the league of top 50 banks globally in terms of assets. Currently, no Indian bank features in the top 50 banks of the world.
• The total customer base of the SBI will now reach to 37 crore people with a branch network of around 24000 and nearly 59000 ATMs across the country. The merged entity will have a deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore.
• Soon, the bank will rationalise its branch network by relocating some of the branches to maximise reach. This will help the bank in optimising its operations and improve its profitability.
• Integration of treasuries of the associate banks with the treasury of SBI will bring in substantial cost saving and synergy in treasury operations.
About State Bank of India
• The State Bank of India is a public sector banking and financial services company. It is a government-owned corporation.
• Its headquarters are located in Mumbai, Maharashtra.
• It has more than 14000 branches, including 191 foreign offices spread across 36 countries. It makes it the largest banking and financial services company in India by assets.
• SBI’s roots lie in the first decade of the 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on June 2, 1806.
• The Bank of Bengal was one of three Presidency banks. The other two were the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843).
• On 27 January 1921, the Presidency banks amalgamated and were rechristened as Imperial Bank of India.
• The imperial Bank of India became the State Bank of India on July 1, 1955.
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