Post-amalgamation Performance Review of Six Public Sector Banks in India

Abstract

Consolidation of public sector banks (PSBs) is a part of reorganisation efforts with an aim to improve their profitability, solvency and efficiency. Of late merger of five subsidiaries of State Bank of India and Bharatiya Mahila Bank Ltd with it in April 2017 has kindled interest in restructuring of unprofitable banks by merging them with a profitable one. In August 2019, the Government of India announced amalgamation of 10 PSBs constituting them into four entities under Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank. Earlier in April 2019, another merger had taken place following the integration of Dena Bank and Vijaya Bank with Bank of Baroda. Studies reveal that while in European countries bank mergers led to improved efficiency, in Asian countries like Indonesia recapitalisation and diversification of banks improved their profitability. In a study of Nigerian banks in Africa it is revealed that post-merger, employee morale diminishes due to stress and anxiety arising out of possible job loss and possible challenges to be met in the new environment. In the present study, the authors have tried to ascertain how profitability, solvency and efficiency of banks improved post-amalgamation in six PSBs. The outcome of the result is a mixed one, while some banks improved their profitability and solvency parameters, for others it is not so perceptible. However, efficiency indicators do not have any significant result for all six of them after amalgamation.