The Union Cabinet today gave its approval to the merger of State Bank of Saurashtra with its parent State Bank of India, India's largest lender controlling more than one-fourth of banking assets.

The merger would enable State Bank of Saurashtra to up-scale in terms of footprint, manpower and other resources. It would also enable it to face competition arising from globalization of the economy, apart from augmenting efficiency and enabling better management of risk

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

For effecting the amalgamation, the government would issue an order sanctioning the merger and move a bill in parliament to repeal State Bank of Saurashtra Act, 1950 and thereafter amend the SBI subsidiary Act, 1959 for the merger to take effect.

Since State Bank of Saurashtra is a 100 per cent subsidiary of SBI, the merger is only a technical process. The new bill, to be introduced in Parliament soon, would be called the SBI Subsidiary Bank Amendment Bill, 2008.

SBI also has plans to kick start the process of merging six other associate banks with itself to better face competition from private rivals.