The State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body, headquartered in Mumbai. It is the largest bank in India, holding a 23% market share by assets. The bank's origins trace back to the Bank of Calcutta, established on June 2, 1806. This bank, along with the Bank of Bombay (established 1840) and the Bank of Madras (established 1843), were known as the Presidency Banks. These three banks were merged on January 27, 1921, to form the Imperial Bank of India.
The Imperial Bank of India was nationalized under the State Bank of India Act, 1955, and was formally constituted as the State Bank of India on July 1, 1955. The primary problem this solved was the lack of banking facilities in rural and semi-urban areas, as the Imperial Bank was largely urban-centric. The nationalization aimed to create a state-partnered commercial bank to extend banking to the masses and align credit with national economic priorities, such as supporting agriculture and small industry.
The State Bank of India Act, 1955, is the legal instrument governing its operations. A key mechanism is outlined in Section 34, which obligates SBI to act as an agent of the Reserve Bank of India (RBI) for government business, including managing public debt and handling government receipts and payments. The Act ensures the Central Government shall, at all times, hold not less than fifty-one per cent of the issued capital of the bank.
SBI connects directly to the Reserve Bank of India, which initially acquired a 60% stake in 1955, a stake later transferred to the Government of India in 2007 to remove conflict of interest. The bank's structure was expanded by the State Bank of India (Subsidiary Banks) Act, 1959, which made eight former State-associated banks its subsidiaries (later called Associates). A major recent change was the repeal of the Subsidiary Banks Act and the merger of all its Associate Banks with SBI, effective April 1, 2017. SBI has also recently adopted the Repo Rate as the external benchmark for all floating rate loans for MSME, housing, and retail loans, effective October 1, 2019, following an RBI notification.