Abstract
The goal of a bank merger is to increase the bank’s value in one way or another. The days of liberalization and globalization are in and there is a spate of mergers and acquisition which is sweeping the corporate world. Consolidation in the banking sector should largely be synergy-driven to acquire a quantum jump in the performance of the combined entity (2 + 2 ≥ 5). It can be achieved by combining complementary strengths, giving a better geographical spread, serving a larger number of customers in a better way with more diversified products and skills, realizing the opportunities for cross-selling, containing the cost of the merged entity, reduced competition, better utilization of available resources and deriving economies of scale. Over the last one and a half decade, the banking sector in India has not only grown in terms of size but also matured, diversified and consolidated to contribute towards building a robust financial system. In this paper, five cases of bank merger have been taken and Null Hypothesis, i.e. there is no difference in mean value of selected variables before merger and after the merger, is set and found rejected (in most of the variables). On the basis of the overall analysis, merger of Bank of Karad Ltd. (BOK) with Bank of India (BOI) was more effective in most of the variables as compared to merger of the New Bank of India (NBI) with Punjab National Bank (PNB), Benaras State Bank Ltd. (BSB) with Bank of Baroda (BOB), Nedungadi Bank Ltd. (NBL) with Punjab National Bank (PNB) and Global Trust Bank Ltd. (GTB) with Oriental Bank of Commerce (OBC).
Highlights
A Merger or Acquisition (M & A) is one of the most transformative undertakings in the life of a firm
Indian Banking sector has been active in Mergers & Acquisitions ever since Section 45 was incorporated in the Banking Companies Act in 1960
The result presented in the Table shows that all the banks except Bank of Baroda and Oriental Bank of Commerce have upward growth of capital after merger; the growth rate of Bank of India is very higher than others
Summary
A Merger or Acquisition (M & A) is one of the most transformative undertakings in the life of a firm. Consolidation of banks through Mergers and Acquisitions is not a new phenomenon for the Indian banking system. Indian Banking sector has been active in Mergers & Acquisitions ever since Section 45 was incorporated in the Banking Companies Act in 1960. During 1961 to 1969; 36 weak banks, both in the public and private sectors were merged with other stronger banks. There have been 37 M & A since the nationalization of 14 major banks in 1969 Of these mergers, 25 involved mergers of private sector banks with public sector banks. Prior to 1991, the amalgamations of banks were primarily triggered by the weak conditions of the banks being merged, whereas in the post-1991 period, there have been mergers between private sector healthy banks, driven by the business and commercial considerations. Merger of public sector healthy banks has not taken place till now. Objective of the Case Study: To evaluate the efficiency of mergers and acquisitions of the selected merged banks on the basis of selected variables prior to and after mergers and acquisitions [1-7]
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