Central Board of State Bank of India on August 25 2007, gave it's go ahead to the merger of State Bank of Saurashtra with itself. Merger is subject to approval of the government and Reserve Bank in accordance with State Bank of India Act, 1955.. In a communication to the Bombay Stock Exchange, SBI said its central board on August 25 approved the merger, subject to approval of the government and Reserve Bank in accordance with State Bank of India Act, 1955.

"This is the beginning of whole group's restructuring. SBS is the smallest of the seven associates and based on the experience we will look at other banks," said SBI Managing Director T S Bhattarcharya.

The other associates are State Bank of Travancore, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore and State Bank of Patiala.

Of these, the first three are listed on stock exchanges. SBI's interest in the associate banks ranges from 75-100 per cent. After SBS, SBI is likely to merge the other three unlisted arms and then follow it up with the listed ones.

SBS has 460 branches and the merger would help eliminate duplication of branches in the same area. Its net profit rose 45 per cent to Rs 87.4 crore in 2006-07. The bank has paid-up equity capital of Rs 314 crore. The total deposits stood at Rs 15,804 crore while total advances were at Rs 11,081 crore.

The merger would help SBI consolidate its position as the country's biggest bank and widen the gap with nearest rival ICICI Bank. With 9,579 branches, SBI has total assets of Rs 5,66,565 crore and posted a net profit of Rs 4,541 crore as on March 31, 2007. ICICI Bank had assets of Rs 3,44,658 crore and posted a net profit of Rs 3,110 crore in 2006-07.

The merger comes at time when the bank has decided to go in for big expansion. The bank is also looking at freeing up capital by setting up a holding company for its life insurance and asset management businesses. SBI’s move to merge its arms could pave the way for further consolidation in the industry, which faces imminent competition from foreign banks from 2009.

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