However, SBI Act 1955 should be amended for the merger, according to the advice of the Law Ministry to the Finance Ministry, sources said.
The matter was referred to the Law Ministry about a month back, sources added.
They also said that if the merger was done without the amendment to the Act, it could lead to strike by employees.
SBI employees only yesterday deferred one-day strike indefinitely following the agreements reached with the bank's management.
Based on the advice of the Law Ministry, the Finance Ministry would prepare note and send the proposal for the Cabinet approval.
Speaking about the merger, SBI Chairman O P Bhatt last week had said, "I hope that the process of merger will be completed without any hurdle. We have completed all the necessary formalities in this regard and now the Central government is mulling over several legal issues after which it will be completed."
"The government is also considering whether there is any need for amendment in the existing laws or not in this regard. Now we are awaiting for government's nod on the issue," he had said.
The Board of SBI and SBS had already given their approval for the proposed merger in August last year despite opposition from a section of bank employees.
The proposed merger would be the first of its kind among the public sector banks.
