New Delhi, Aug. 19: The government plans to merge the State Bank of Hyderabad, State Bank of Indore and State Bank of Patiala with the State Bank of India (SBI) after the ongoing merger between the State Bank of Saurashtra and the SBI is over. The trio are all unlisted subsidiaries of the SBI.

Top finance ministry officials said the government would watch the merger process and the “external environment”, hinting at the protests by labour unions and the Left parties, before taking a call on the remaining mergers.

The government wants to merge these unlisted banks with the SBI, allowing the listed subsidiaries — State Bank of Bikaner & Jaipur, State Bank of Travancore and State Bank of Mysore — to remain standalone entities.

The government has long been looking at the possibility of either merging the SBI’s subsidiaries with it or creating a separate mega bank by merging the seven subsidiaries into a separate bank.

While the first proposal was criticised on the ground that it would create a huge monolith, the second was not favoured by the SBI as it would have created a rival for itself out of its own subsidiaries.

Officials now say they are looking at the possibility of merging the smaller unlisted subsidiaries which are almost 100 per cent owned by the SBI.

The prospects of India opening up its banking sector to foreign banks in a big way in the next few years have made it necessary to add to the SBI’s size.

Finance minister P. Chidambaram has called for a series of mega mergers in the state-run banking space to create larger and more efficient entities that could compete with foreign majors such as Citibank, Deustche and NatWest.

The move towards a merger was initiated last year when the government lifted a cap of 200 shares that a single investor can hold in any of its listed subsidiaries.

However, unions continue to oppose the merger as it can bring about branch rationalisation and the relocation of employees.

Officials said innovative ways could be found to keep workers in the same town or district.

The SBI has already started moving towards an eventual merger and has integrated its technology platform with the associate banks, the officials said.

The bank has put in place a common IT and ATM network and accounting system which will enable a smoother merger of associate banks with the SBI once formal approval is received from the government.

The SBI owns a 100 per cent stake in two of the unlisted subsidiaries, while in the State Bank of Indore, it owns around 99 per cent. Hence, the merger process is expected to be smooth.