The Bank of Bengal was founded on 2 June 1806. The Bank of Bengal was one of three presidency banks, the other two Being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three presidency banks were incorporated as joint stock companies and were the result of royal charters. These three banks received the exclusive right to issue paper currency until 1861, when the Paper Currency Act was taken over by the Government of India. The Presidency Bank was amalgamated on 27 January 1921, and the re-organized banking entity took its name from the Imperial Bank of India. The Imperial Bank of India is a joint stock company but without the Government.
Pursuant to the Provisions of the State Bank of India Act, 1955, the Reserve Bank of India, which is the central bank of India, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, The Imperial Bank of India became the State Bank of India. In 2008, the Government of India acquired the Reserve Bank of India's stake in the SBI so as to remove any conflict of interest as the RBI is the country's banking regulatory authority.
In 1959, the Government passed the State Bank of India (Subsidiary Banks) Act. These made eight banks that had been belonged to princely states into subsidiaries of SBI. This was the first Five Year Plan of the time, which was prioritized by Rural India. The government integrated these banks into the State Bank of India system to expand its rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of Bikaner (est.1944).
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI acquired in 1969, together with its 28 properties. The SBI acquired the National Bank of Lahore (est. 1942), which had 24 properties. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao Scindia. The bank had been owned by Dukan Pichadi, a small moneylender, owned by the Maharaja. The new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 properties. SBI was the acquirer of its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.
There has been a proposal to merge all the associated banks into the SBI to create a single very large bank and streamline operation.
The first step towards unification occurred on 13 August 2008 when the State Bank of Saurashtra merged with the SBI, asking for the number of associate state banks from seven to six. On 19 June 2009, the SBI Board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who hold the shares prior to the takeover by the government hold 1.7% of the balance.)
The acquisition of State Bank of Indore added 470 directories to SBI's existing network of banks. Also, following the acquisition, SBI's total assets will approach approach 10 trillion. The total assets of the SBI and the State Bank of Indore were ₹ 9,981,190 million as of March 2009.
On 7 October 2013, Arundhati Bhattacharyabecame the First Woman to Be the Chairperson of the Bank. Mrs. Bhattacharya received an extension of two years of service into the merger of the SBI's five remaining associated banks.
