The Impact of Mergers and Acquisitions on the Financial Performance of Indian Banking Sector: An Analytical Study

Abstract

An efficient and sound banking system is one of the cornerstones of a strong economy. India’s banking system differs greatly from that of other Asian countries due to the nation’s distinct geographic, social, and economic attributes. The banking industry makes a significant contribution to the Indian economy by providing timely loans to all societal segments while also collecting deposits from them. Commercial banks promote balanced regional development in India by providing the required financial infrastructure and finances for underdeveloped areas. They also encourage individuals to preserve their money and use it for investments in profitable endeavours, so fostering economic growth and resulting in a significant boost to employment prospects. In recent times, the Indian banking sector is an industry that is expanding quickly and changing its shape through mergers and acquisitions with prime objectives to control the rise in bad loans or non-performing assets, robust financial health, upgradation of technology and ensure better scale efficiency. Numerous domestic and foreign banks are involved in merger and acquisition activities. This study tries to examine how major mergers and acquisitions have operated in the Indian banking industry. A crucial pre-requisite is the integration of the Indian banking sector through mergers and acquisitions based on business considerations and strategies. Bank mergers encourage institutions to expand globally and create better synergy while also enabling larger banks to acquire the troubled assets of smaller banks. Thus, the present paper is an initiative to elucidate the need for bank mergers and acquisitions and to study the impact of such mergers and acquisitions on the equity shares of the shareholders’ capital and on the financial performance of the concerned banks.