The State Bank of India Act,1955
Section 35. State Bank may acquire the business of other Banks
(1) The State Bank may, with the sanction of the Central Government, and shall, if so directed by the Central Government in consultation with the Reserve Bank, enter into negotiations for acquiring the business, including the assets and liabilities, of any banking institution.
(2) If the terms and conditions relating to the acquisition of any such banking institution are approved by the Central Board and the directorate of the banking institution concerned and are also approved by the Reserve Bank, they shall be submitted to the Central Government, and, if sanctioned by the Central Government by order in writing, shall, notwithstanding anything to the contrary contained in the Indian Companies Act,1913 (7 of 1913), or in the Banking Companies Act,1949 (10 of 1949), be binding on the State Bank and the banking institution concerned as well as the shareholders and creditors.
(3) The consideration for the acquisition of any banking institution or of any assets or liabilities of a banking institution under this section may, if so agreed upon, be paid either in cash or by allotment of shares in the capital of the State Bank or partly in cash and partly by way of such allotment, and the State Bank may, for the purpose of any such allotment of shares, increase, subject to the other provisions contained in this Act relating to the increase of capital, the capital of the State Bank by the issue of such number of shares as may be determined by the State Bank.
(4) Any banking business acquired under this section shall thereafter be carried on by the State Bank in accordance with the provisions of this Act subject to such exemptions or modifications as the central Government may, by notification in the Official Gazette, make in this behalf in consultation with the Reserve Bank;
Provided that no such exemption or modification shall be made so as to have effect for a period of more than seven years from the date of acquisition.