RECENT TIE UP OF SBI WITH ITS ASSOCIATES: A PROBE OF PRE AND POST-MERGER ATTAINMENT THROUGH THE LENS OF CAMELS FRAMEWORK

Abstract

The term ‘merger’ signifies the joining of two or more business concerns into a single one mainly with the purpose of generating much more effective output. But, sometimes these tie up events are done to absorb the weak entity with intention to cover up these sick entity’s loopholes. Merger in banking sector is now a latest trend to take over weak banks and enhance its business capability with capturing a huge portion of competitive market. In simple terms, banks are unified to enjoy the synergy benefits of the merger. State Bank of India which is currently the most popular one public sector bank of India also witnessed such kind of consolidation events primarily with its subsidiaries banks. The almost latest tie up deal of SBI with its five subsidiaries banks & Bharatiya Mahila Bank occurred on 1st April 2017 is the center point of this study around which analysis is rotating with the intention to examine the impact of consolidation on this largest bank’s performance through the lens of CAMELS framework. This article is purely based on secondary data and all the required facts & figures are congregated from ‘CAPITALINE- 2000 Database’. Three years pre tie up phase (i.e., from 2014-15 to 2016-17) & three years post tie up phase (i.e., from 2017-18 to 2019-20) of State Bank India are explored in this study. The findings of the study confirms that State Bank of India has failed to enjoy the benefits of merger as it take over its own associate banks which are already have high non- performing assets. Ratios related to capital adequacy do not point any remarkable improvements in post-merger phase. Similarly, bank has failed to improve its assets quality. Except Business per Employee all the management efficiency ratios have not gained enough mileage. Overall earnings capacity and liquidity of the bank has also deteriorated after merger. As a whole it can be opined that merger has not made any significant difference in financial performance of SBI, at least in short run. KEYWORDS: Merger & Acquisition, CAMELS, Assets Quality, Sensitivity, Banking Sector