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The law that created the State Bank of India and transferred the Imperial Bank of India's undertaking to it, to expand rural and semi-urban banking.
The State Bank of India Act, 1955 is the law that established the State Bank of India and provided for the transfer to it of the undertaking of the Imperial Bank of India. It is Act No. 23 of 1955, received assent on 8 May 1955 and came into force on 1 July 1955. Section 3 constituted the State Bank as a body corporate with perpetual succession. The Act was enacted to expand banking facilities, particularly in rural and semi-urban areas, and to serve wider public purposes — marking a shift from purely commercial banking towards development banking.
Type: LawSection 3 constituted the State Bank of India as a body corporate with perpetual succession
Section 6 transferred the entire undertaking of the Imperial Bank of India — property, investments, books, rights, debts and liabilities
Section 7 protected employees, transferring eligible Imperial Bank officers and staff with the same tenure, remuneration and service rights
Section 5 requires the Central Government to hold at least 51% of issued equity capital
Section 16 required at least 400 additional branches within five years of the appointed day — the branch expansion mandate
Contains 57 sections across eight chapters covering incorporation, shares, management, banking business, funds, audit and miscellaneous matters
The Act was designed around a single institutional transition: converting the Imperial Bank of India into a state-controlled bank. Its provisions therefore deal extensively with the mechanics of transfer — assets, liabilities, employees and shareholder compensation. Shareholders of the Imperial Bank were compensated under Section 9 according to the First Schedule, which prescribed Rs 1,765.10 per fully paid-up share and Rs 431.12.4 per partly paid-up share. The Act has since been amended many times, reflecting the bank's evolving role.
The State Bank of India Act, 1955 (Act No. 23 of 1955) receives assent
The Act comes into force and the State Bank of India is constituted
Amended repeatedly — including in 1957, 1959, 1964, 1973, 1983, 1993, 2007, 2010, 2018 and 2025
Constitutes the State Bank as a body corporate with perpetual succession
Authorised capital of Rs 5,000 crore, divided into 500 crore fully paid-up shares of Rs 10 each
Central Government must hold at least 51% of issued equity capital
Central office at Mumbai; local head offices at Mumbai, Kolkata and Chennai
General management and direction entrusted to the Central Board
Enables the State Bank to act as an agent of the Reserve Bank of India
Imposes obligations of fidelity and secrecy
The Act represents an early and decisive move towards using banking as an instrument of development rather than leaving it to commercial priorities alone. Its branch expansion mandate — at least 400 additional branches within five years — was an explicit attempt to push banking into rural and semi-urban India, where the Imperial Bank had little presence. Section 18, requiring the State Bank to follow Central Government directions on policy matters involving public interest, established state direction over a major bank more than a decade before the bank nationalisations of 1969.
Frequency: A staple of Banking exam general awareness; also appears in SSC and Railway papers.
State Bank of India Act, 1955 — Act No. 23 of 1955, in force from 1 July 1955
Created SBI and transferred the Imperial Bank of India's undertaking to it
Central Government must hold at least 51% of issued equity capital
Authorised capital Rs 5,000 crore, in 500 crore shares of Rs 10 each
Central office Mumbai; local head offices Mumbai, Kolkata and Chennai
Required at least 400 additional branches within five years to widen rural banking
The Imperial Bank of India. Section 6 of the State Bank of India Act, 1955 transferred its entire undertaking — property, investments, rights, debts and liabilities — to the newly created State Bank.
It received assent on 8 May 1955 and came into force on 1 July 1955, which is when the State Bank of India was constituted as a body corporate.
Section 5 of the Act requires the Central Government to hold at least 51% of the issued equity capital of the State Bank.
Section 16 provides for the central office at Mumbai and local head offices at Mumbai, Kolkata and Chennai.