After having tested the waters with the merger of one of its unlisted associate banks, State Bank of Saurashtra, with itself, SBI is now preparing the ground for a merging the operatuions of  two more of its associate banks - State Bank of Indore and State Bank of Patiala.

The merger of these two SBI associate banks with the parent will begin after the government completes the groundwork.

The government would have to present a new bill called the SBI Subsidiary Bank Amendment Bill 2008 in Parliament before granting SBI final approval on the merger. The finance ministry is likely to introduce changes in the SBI Subsidiary Act through the proposed Bill to ensure no requirement for amendment in the Act each time a subsidiary is merged with the parent bank.

A finance ministry spokesperson said that the process will start once everything is stable and SBI is able to handle the pressures of integrating the operations of the associate banks with itself.

This will lead to the merger of other unlisted associate banks with SBI. The government, in the first phase is giving priority to the merger of only 100-per cent owned subsidiaries of SBI. Of the associate banks, SBI owns 98.05 per cent of State Bank of Indore, while it is 100 per cent in State Bank of Patiala and State Bank of Hyderabad. In other associate banks, it has diluted its stake through listing them on different stock exchanges.

A senior SBI official said that the bank had completed the integration process of SBS and after the integration of its other associates, would able to compete better with its global peers.
Earlier this year SBI successfully integrated State Bank of Saurashtra's operations with itself this year aftter the union cabinet's  aproval in August last year (See: Finance ministry clears SBI-SBS merger; bank employees plan protest) 

After the merger of State Bank of Indore and State Bank of Patiala, SBI will be left with four associate banks - State Bank of Travancore, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Hyderabad and State bank of Mysore.

The merger would help SBI consolidate its position as the country's biggest bank and widen the gap with its nearest rival ICICI Bank. The mergers will also help broaden its business in terms of leveraging the synergies of the strong regional reach of the associate banks with its own pan-India operations, eliminate duplication of branches in the same area and effectively use human resources bosting its competitive strengths.

State Bank of Indore, popularly known as Indore Bank in the Malwa Region of Madhya Pradesh, was originally incorporated as the Bank of Indore Ltd under a special charter granted by Maharaja Tukojirao Holker-III, the then ruler of this region. It became a subsidiary of State Bank of India from 1 January 1960 and was renamed as State Bank of Indore

The Bank acquired the business of The Bank of Dewas Ltd. in 1962 and The Dewas Senior Bank Ltd in 1965 and was up-graded to category 'A' bank in 1971.

State Bank of Patiala dates back to 1917. It was founded by the the late Bhupinder Singh, Maharaja of erstwhile Patiala state, as as the Patiala State Bank with one branch called Chowk Fort, Patiala, to begin with. The constitution, scope and operations of the Bank underwent a sea change with the formation of the Patiala and east Punjab States Union (PEPSU) in 1948.  The bank was then reorganised and brought under the control of Reserve Bank of India and was renamed  the Bank of Patiala and became a subsidiary of the State Bank of India on 1 April 1960, and named State Bank of Patiala

The State Bank of Patiala has a network of 830 service outlets, including 750 branches, in all major cities of India, but most of the branches are located in Punjab, Haryana, Himachal Pradesh, Rajasthan, Jammu & Kashmir, Delhi and Chandigarh