The second biggest bank in the country, the Bank of India, has been acquired by a commercial bank.
The merger of Hindustan Commercial Bank (HCB) and State Bank of Gujarat (SBI) was approved by the Supreme Court.
The acquisition will create a new commercial bank that will be run by an executive team of senior bankers, a spokesperson for the State Bank said on Wednesday.
HCB, which is India’s third largest lender, will be headed by former HSBC chief executive officer Sanjay Bhattacharya.
The bank’s shares were up 5% in early trading in New York.
The announcement comes amid a global financial crisis that has seen the global financial system teetering on the brink of collapse.
The Indian economy has been hit hard by the global economic slowdown.
It is the world’s fastest-growing economy.
In the past six years, the Indian economy grew by an annualised 2.5% rate, and has been among the world leaders in gross domestic product growth, according to the World Bank.
The banks will also be given the right to make investments in India through its investment bank, Hindustans National Commercial Bank Ltd (HNCB), a subsidiary of State Bank.
According to Reuters, the new bank will have a staff of over 2,000 people.
SBI, which has the world largest commercial banking operations in India, was already part of HCB before the merger, and is now the largest lender by assets in the world.
The commercial bank will be the biggest bank by assets and be able to invest in nearly all sectors of the economy, SBI said.
The two banks will be able both to provide investment services to each other, the spokesperson added.