IMPACT OF BANK MERGER ON NSE NIFTY: A CASE STUDY ON MERGING OF BANKS IN 2020

Abstract

Narasimham Committee in the late 1990s recommended consolidation through a process of merging of strong banks. The Committee recommended the closure of the banks those are weaker in comparison to other banks, instead of merging them. The biggest positive aspect of the merging of banks will lead to the formation of banks of scale. There are a large number of banks which are of very small in size in terms of global standards & their growth is restricted by their inability to expand. India needs more global level banks to face global competitiveness. The recent merging of the banks were aimed at addressing this problem. The announcement of merging of the banks by Finance Minister Nirmala Sitharaman on 30/08/2019, raised the expectation that it would be the most significant event that the country has witnessed since nationalization. The intention to create banks that could compete with the banks of global level & would also serve the needs of a $ 5 trillion economy by 2025. Keeping in view the above intentions, Finance Minister, Nirmala Sitharaman, declared the merging of ten public sector banks into four entities to improve their liquidity, tackling the issues of non performing assets & risk diversification. The present paper aims to explore the impact of the merging of the Banks on NSE Nifty, with respect to Stock returns, Volume of share trading & Volume of share turnover.