Explaining the rationale behind the merger, the finance ministry said the SBI group already has 126 exclusive all-women branches across the country while the Bharatiya Mahila Bank (BMB) has only seven.
"The proportion of administrative and managerial cost in the BMB is much higher to reach the same coverage. For the same cost, a much higher volume of loans to women could be given through the SBI," it said.
The ministry said there was a need to achieve the objectives of affordable credit to women as well as propagation of women-centric products quickly through a wider network and lower cost of funds.
"The Government of India has decided to merge the BMB with the State Bank of India to ensure greater banking services outreach to a larger number of women, at a faster pace," the ministry statement read.
In the three years since the Bharatiya Mahila Bank was established, it has extended loans of Rs 192 crore to women borrowers while the SBI group has provided loans of about Rs 46,000 crore to women borrowers.
"The decision to merge the BMB with the SBI has been taken in view of the advantage of the large network of the SBI, among other things," the statement added.
The SBI has a large outreach of more than 20,000 branches and lowest cost of funds in the sector. Of the total workforce of around 2 lakh employees in the SBI, 22 per cent are women.
Set up in 2013, Bharatiya Mahila Bank has 103 branches with its presence in almost all the states. The total business of the bank is about Rs 1,600 crore.
"The Union Government is committed to enhancing the access to financial services to the population at large and women in particular," the ministry said.
Under the Pradhan Mantri Jan Dhan financial inclusion scheme, preference is given to women for overdraft facility. Pradhan Mantri Mudra Yojana had 73 per cent women borrowers in the previous financial year, it added.