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The government on Thursday approved the merger of State Bank of [Get Quote] Saurashtra with its parent State Bank of India [Get Quote] to create a bigger banking entity in terms of size to take on competition ushered in by globalisation.

For effecting the amalgamation, the government would first repeal the State Bank of Saurashtra Act, 1950 and thereafter amend the SBI Subsidiary Act, 1959 to remove references to the SBS Act wherever it occurs.

The new Bill, to be introduced in Parliament soon, would be called the SBI Subsidiary Bank Amendment Bill, 2008.

"The merger of State Bank of Saurashtra with State Bank of India will enable it to scale up in terms of footprint, manpower and resources... face competition arising from globalisation. . .augmenting efficiency and enabling better management of risks," Union Minister for Information and Broadcasting P R Dasmunsi told reporters here after a meeting of the Union Cabinet.

The boards of SBI and State Bank of Saurashtra had already given their approval for the proposed merger in August last year.

The merger would be the first of its kind among public sector banks and would kick start the process for merging six other associate banks with SBI.

Since State Bank of Saurashtra is a 100 per cent subsidiary of SBI, the merger is only a technical process.