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THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959

Title : THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959

Year : 1959



With effect from such date, as the Central Government may, by notification in the Official Gazette, specify in this behalf, there shall be constituted the following new banks, namely:-

(a) The State Bank of Bikaners;

2[***]

1[***]

(d) The State Bank of Mysore;

(e) The State Bank of Patiala;

(f) The State Bank of Travancore; and different dates may be specified for different new banks.

3A - 3* Change Or Name Of A Subsidiary Bank

(1) The Central Government after consulting the State Bank and the Reserve Bank may, by notification in the Official Gazette direct that the name of any subsidiary bank shall, with effect from such date as may be specified in this behalf, be changed to any other name and thereupon any reference 10 that subsidiary bank in this Act or any other law for the time being in force or in any contract, instrument or document shall be construed as a reference to that bank by its new name.

(2) The change in the name of a subsidiary bank under sub-section (1) shall not affect any rights or obligations of that bank or render defective any legal proceedings by or against it, and any legal proceedings which might have been continued or commenced by or against that bank by its former name may be continued by or against it by its new name.

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1. Heading of Chap. II substituted and clause (c) omitted by the State - Associated Banks (Miscellaneous Provisions) Act, 1962 (56 of 1962). Section 3 w.e.f. 14-12-1962.

2. Omitted by the State Bank of India (Subsidiary Banks) Amendment Act, 2011 w.e.f. 01.06.2011 previous text was :-

(b) the State Bank of Indore;

3. Inserted by the State-Associated Banks (Miscellaneous Provisions) Act, 1962 (56 of 1962), Section3 w.e.f. 14-12-1962.

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(1) Every new bank shall be a body corporate with perpetual succession and a common seal and shall sue and be sued in its name.

(2) The body corporate constituting each of the new banks shall consist of the State Bank and other shareholders, if any, for the time being of the new bank.

(3) Every new bank shall carry on the business of banking and other business in accordance with the provisions of this Act, and shall have power to acquire and hold properly, whether movable or immovable, for the purposes of its business and to dispose of the same.



(1) The head office of each of the new banks shall be at such place as the Central Government may, by notification in the Official Gazette, from time to time, specify.

(2) Every new bank shall maintain as its branches all branches of the coresponding bank in existence immediately before the appointed day, and shall not establish any new branch or discontinue any branch except in consultation with the State Bank and with the approval of the Reserve Bank.



(1) Subject to the provisions of this Act, the authorised capital of every new bank shall be rupees five hundred crores.

(2) The authorised capital of every new bank shall be divided into shares of one hundred rupees each or of such denomination as the new bank may, with the approval of the State Bank, decide.

(3) Every new bank may issue the certificates of shares of equivalent values of such denomination as the new bank may, decide, with the approval of the State Bank, in accordance with the procedure as may be prescribed and every shareholder of the new bank shall be entitled to have the certificate of shares of equivalent value of such denomination.

(4) Notwithstanding anything contained in sub-section (1), the State Bank may, 2*[in consultation with the Reserve Bank and with the approval of the Central Government], authorise a new bank to increase or reduce its authorised capital.]
 
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1. Substituted for the following by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007) for the following ; -

"(1) Subject to the provisions of this Act, the authorised capital of the State Bank of Mysore and the State Bank of Travancore shall be rupees two crores each. and the authorised capital of every other new bank shall be rupees one crore.

(2) The authorised capital of every new bank shall be divided into shares of one hundred rupees each.

(3) Notwithstanding anything contained in this section, the State Bank may, with the approval of the Reserve Bank, authorise a new bank to increase or reduce its authorised capital;

Provided that where the authorised capital is so increased, the shares issued shall be of the de┬Čnomination specified in sub-section (2)."

2. Substituted by the The State Bank of India (Subsidiary Banks Laws) Amendment Act, 2011 (Act No. 17 of 2011) for the following : - "with the approval of the Reserve Bank"
 
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(1) On the appointed day, the issued capital of a new bank shall consist of such amount divided into fully paid-up shares of hundred rupees each, as the State Bank may, with the approval of the Reserve Bank, fix.

1*[(1A) Notwithstanding anything contained in sub-section (1), the issued capital of a new bank shall, consist of such amount as the State Bank may, 3*[in consultation with the Reserve Bank and with the approval of the Central Government], fix, and shall be divided into fully paid-up shares of such denomination in accordance with sub-section (2) of section 6.]

(2) All shares in the issued capital of a new bank shall, on the appointed day stand allotted to the State Bank.

(3) The State Bank shall, as soon as may be, after the determination, if any, by the Tribunal, of the amount of compensation payable in respect of an existing bank, consider whether any increase in, or reduction of, the issued capital of the corresponding new bank as fixed under sub-section (1), by way of adjustment, or transfer from or to, the reserves of such bank, or in any other manner, is necessary or expedient and may, thereafter with the approval of the Reserve Bank, direct that bank to increase or reduce its issued capital.

2*[(4) A new bank may from time to time, 4*[with the approval of the State Bank and the Central Government in consultation with the Reserve Bank], increase, whether by 5*[public issue or rights issue] or by preferential allotment or private placement in accordance with the procedure as may be prescribed, its issued capital by issue of equity or preference shares.

(5) The issued capital of a new bank shall consist of equity shares or equity and preference shares:

Provided that the issue of preference shares shall be in accordance with the guidelines framed by the Reserve Bank specifying the class of preference shares, the extent of issue of each class of such preference shares (whether perpetual or irredeemable or redeemable) and the terms and conditions subject to which, each class of preference shares may be issued.

(6) A new bank may, 4[with the approval of the State Bank and the Central Government in consultation with the Reserve Bank], increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank, 3*[in consultation with the Reserve Bank and with the approval of the Central Government], direct.

(7) No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than fifty-one per cent. of the issued capital consisting of equity shares of new bank.

(8) A new bank may accept the money in respect of shares issued towards increase in issued capital in installments, make calls and forfeit unpaid shares and re-issue them, in the manner as may be prescribed.]
 
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1. Inserted by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007).

2. Substituted for the following by the State Bank of India (Subsidiary Banks Laws) Amendment Act, 2007 (Act No. 30 of 2007)
"(4) Without prejudice to the provision contained in sub-section (3) a new bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time, its issued capital and the capital so increased shall consist of fully paid-up shares to be issued in such manner as the State Bank may, with the approval of the Reserve Bank, direct.

(5) No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than fifty-five per cent of the issued capital of that bank"

3. Substituted by the The State Bank of India (Subsidiary Banks Laws) Amendment Act, 2011 (Act No. 17 of 2011) for the following : - "with the approval of the Reserve Bank"

4. Substituted by the The State Bank of India (Subsidiary Banks Laws) Amendment Act, 2011 (Act No. 17 of 2011) for the following : - "with the approval of the State Bank and the Reserve Bank"

5. Substituted by the The State Bank of India (Subsidiary Banks Laws) Amendment Act, 2011 (Act No. 17 of 2011) for the following : - "public issue"

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(1) Every new bank shall establish a reserve fund which subject to the provisions of sub-section (3) of section 7 and of sub-section (2) of this section, shall-

(a) On the appointed day, consist of sucii sum as the State Bank, with the approval of the Reserve Bank, may determine; and

(b) After the appointed day, consist of the sum aforesaid together with such further sums as may be transferred to the reserve fund by the new bank out of its annual net profits before declaring a dividend.

(2) The State Bank shall, us soon as may be after the determination, if any, of the amount of compensation by the Tribunal, in respect of an existing bank, consider whether any increase in, or reduction of, the reserve fund of the corresponding new bank, by way of adjustment, by transfer from, or to, any account, or towards provision for bad and doubtful debts, depreciation of any assets or contingencies, or for any other purpose, is necessary, and may, thereafter, with the approval of the Reserve Bank, direct that bank to so increase or reduce its reserve fund.



On the constitution of a new bank, all shares in the capital of the corresponding banks, where such corresponding bank has a share capital, shall stand transferred to, and shall vest in, the State Bank, free of all trusts, liabilities and encumbrances.



(1) Subject to the other provisions contained in this Act, when a new bank is constituted, the undertaking of the corresponding bank shall stand transferred to, and vest in, the new bank.

(2) The undertaking of the corresponding bank referred to in sub-section (1) shall be deemed to include all rights, powers, authorities and privileges and all property, movable and immovable, including cash balances, reserve funds investments and all other interests and rights in, or arising out of, such property and all books, accounts and documents relating thereto as may be in the possession of that bank immediately before the appointed clay, and shall also be deemed to include all debts, liabilities and obligations of whatever kind, then existing of that bank.

(3) Without prejudice to the other provisions contained in this Act, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature, subsisting or having effect immediately before the appointed day and to which any existing bank is a party, or which are in favour of that bank, shall be of full force and effect against or in favour of the corresponding new bank, as the case may be and may be enforced or acted upon as fully and effectually as if instead of the existing bank the corresponding new bank had been a party thereto or as if they had been issued in favour of the corresponding new bank.

(4) If, on the appointed day, any suit, appeal or other legal proceeding of whatever nature by or against an existing bank is pending, the same shall not abate, be discontinued or be in any way prejudicially affected by reason of transfer to the corresponding new bank of the undertaking of the existing bank, or of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the corresponding new bank.



(1) Save as otherwise provided in this Act, every employee of an existing bank in the employment of that bank immediately before the appointed day, shall, on and from that day become an employee of the corresponding new bank and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension, gratuity and other matters as be would have held the same on the appointed day, if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and shall continue to do so unless and until his employment in that bank is terminated or until his remuneration or other terms and conditions of service are revised or altered by the corresponding new bank under, or in pursuance of, any law, or in accordance with any provision which, for the time being governs, his service:

Provided that nothing contained in this sub-section shall apply to an employee of the Bank of Patiala who holds a civil post under the State of Punjab unless, prior to the appointed day, he has intimated his consent to become an employee of the State Bank of Patiala by notice in writing, given to the Government of that State through the Bank of Patiala.

(2) Any person who, on the appointed day, is entitled to, or is in receipt of a pension or other superannuation of compassionate allowance or other benefit from an existing bank or from any provident, pension or other fund or from any authority administering such fund, shall be entitled to be paid by, and to receive from, the corresponding new bank or any provident, pension or other fund or from any authority administering such fund, the same pension, allowance or benefit, so long as be observes the conditions on which the pension, allowance or benefit was granted, and if any question arises whether be has so observed such conditions, the question shall be determined by the State Bank and its decision thereon shall be final.

(3) For the persons who immediately before the appointed day are the trustees of, or the members of any authority administering, any fund constituted for the benefit of the employees of an existing bank, there shall be substituted as trustees or members such persons us the State Bank may, by general or special order, specify.

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947, or any other law or in any agreement for the time being in force, the transfer from an existing bank of the services of any officer or employee of that bank to the corresponding new bank in terms of this section shall not entitle any such officer or employee, to any compensation to which be would, but for this provision, have been entitled under any such law or agreement, and no claim in respect of such compensation shall be entertained by any Court, tribunal or other authority.



(1) If, according to the laws of any country outside India, the provisions of this Act by themselves are not effective to transfer or vest any asset or liability situated in that country which forms part of the undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in relation to such asset or liability shall, on and from the appointed day, stand, entrusted to the1*[managing director] for the time being of the corresponding new bank and the1[managing director] may exercise all powers and do all such acts and things as are exercised or done by the existing bank for the purpose of effectively winding up the affairs of that bank.

(2) The1*[managing director] of the corresponding new bank shall, in exercise of the powers conferred on him by sub-section (1), take all such steps as may be required by the laws of any such country outside India for the purpose of effecting such transfer or vesting, and in connection therewith the1*[managing director] may either himself or through any person authorised by him in this behalf, realise any asset and discharge any liability of the existing bank and transfer the net proceeds thereof to the corresponding new bank.

(3) Notwithstanding anything contained in sub-section (1) or sub-section (2) on and from the appointed day, no person shall make any claim or demand or take any proceeding in India against any existing bank or any person acting in its name or on its behalf except in so far as may be necessary for enforcing the provisions of this section or except in so far as it relates to any offence committed by such person.

2*[(4) For the purposes of this section,-

(a) "Corresponding new bank" means in relation to the Bank of Jaipur Limited, the institution constituted under section 3 as the State Bank of Bikaner,

(b) "Existing bank" includes the Bank of Jaipur Limited.]

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1. Substituted for the words "general manager" by the State Bank Laws (Amendment) Act, 1973 (48 of 1973), Section 21 w.e.f 1-7-1974.

2. Inserted by the State-Associated Banks (Miscillaneous Provisions) Act, 1962 [56 of 1962), Section 3 w.e.f. 1-1-1963.

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Last updated on July, 2016

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