New Delhi: The government on Thursday approved merger of State Bank of India Commercial and International Bank Ltd (SBICI) with its parent bank SBI.

SBICI, with two branches, is a wholly owned subsidiary of State Bank of India (SBI) and functions as a private sector bank offering an array of financial products and services.

"Its performance over the period of its existence has not been consistent. It has not paid any dividend since its inception...In the overall analysis, continuation of SBICI in its present form would not create a substantial organization with a separate niche," Information and Broadcasting, Ambika Soni told reporters after a Cabinet meeting here.

So also as an independent bank, SBICI has had to maintain a full-fledged, elaborate administrative setup to conform to regulatory requirements, she said, adding, and the cost of maintaining such a structure is disproportionate to the level of operations of the SBICI.

The proposed merger will help in maintaining the administrative structure of SBICI as both its branches in Mumbai will be easily absorbed in the operations of the parent entity, she said.

While no present beneficiary of its parent SBI would be affected, the number of clients of SBICI will have access to the bigger network of SBI, she said.

SBICI was set up in 1994 after taking over the Indian operations of the erstwhile Bank of Credit & Commerce International Ltd (BCCI), which went into liquidation in 1991.

Its net worth stood at Rs 128.74 crore on the capital base of Rs 100 crore. It had total business (deposits and advances) of less than Rs 700 crore, with a return on asset of 0.49 per cent.

As per RBI guidelines, the Minister said, for ownership in private sector bank, the bank's capital had to be raised to Rs 300 crore.

The existing business model of SBICI and the returns generated by it over the years do not justify capital infusion, she said.

As of March 2011, SBICI earned a net profit of Rs 4.21 crore. The board of SBI had cleared amalgamation of SBICI with itself in 2008.

SBICI's Capital Adequacy Ratio (CAR) stood at 28.16 per cent at the end of March 2011.

(Agencies)