Sources point out that the Union Cabinet, which was supposed to discuss State Bank of India’s merger plans with State Bank of Saurashtra recently, did not even do so owing to the legal hurdles that still need to be cleared.

The crux of the matter lies in the existence of two separate acts — SBI Act and State Bank of India (Subsidiary Banks) Act, 1959 — governing both public sector banks. For a complete merger between the State Bank of India and its associates, the SBI (Subsidiary Banks) Act has to be repealed by Parliament. Effectively, the merger plan now has to be referred to Parliament.

Sources also point out that though the boards of SBI and of its seven associate banks are scheduled to meet next week on the merger, it is unlikely that they would be in a position to take a final decision as a result of the pending legislative requirements.

“The merger is on the agenda, but a final decision may not be taken on that day,” confirmed the chief of an SBI associate bank.

SBI is also undertaking a quick due diligence exercise for both itself and its seven associates in a centralised manner at its corporate head office in Mumbai.

The associate banks of SBI are State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Saurashtra, State Bank of Mysore and State Bank of Indore.

The associate banks have a branch network of 4,744 and all of them have fully adopted core-banking solutions. These banks are well capitalised and profitability ratios are also impressive. Three of the associate ban--s-State Bank of Travancore, State Bank of Mysore and State Bank of Bikaner & Jai--ur-are also listed.

What is the problem?

•SBI & associates fall under separate Acts; one needs to repeal

•What has to be done?

The entire merger plan now has to be referred to Parliament

• What happens now?

Though PSB boards are meeting next week, no decision likely

• The associate banks of SBI are State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Saurashtra, State Bank of Mysore and State Bank of Indore.