International Journal of Science and Research (IJSR)

ISSN: 2319-7064
SJIF (2022): 7.942

Merger and Acquisitions in Indian Banking Sector

of Five Years (2018-2022): A Review
Dr. Meenakshi Kumari1, Archana Kumari2
1
Assistant Professor, Faculty of Business Management & Commerce Usha Martin University, Ranchi-Purulia Road, Highway, Angara,
Jharkhand
2
Final year MBA Student, Faculty of Business Management & Commerce Usha Martin University, Ranchi-Purulia Road, Highway,
Angara, Jharkhand

Abstract: The Indian Banking System plays a very extensive role in the economy development of the country. The banking sector of
India is one of the expeditiously growing sector in the country. Merger and Acquisition plays a Critical role in Indian banking Sector,
as it helps in increasing the pre and post Merger Financial performance of banks to achieve their goals. However the banks should
keep in their views about both the positives and negatives of their entities and make decisions accordingly. merger of Andhra Bank,
Corporation Bank with Union Bank of India, the main objectives of the study to know the reasons as to why the merger is necessary
and to know the impact of merger on the performance of banks; to find out the challenges and benefits of merger on the banks and
customers; to determine the overall impact on the Indian economy; and to know the after effect of merger on the senior authorities of
merged banks, the trends in M&A’s in Indian banking and then impact of M&A’s has been studied in three leading banks of India
(BOB, OBC, PNB), to analyze financial performance of Canara Bank pre and post-amalgamation, evaluates the financial performance
of Pre and Post Merger of ICICI Bank and Bank of Rajasthan, the reasons behind mergers and shows its effect on profitability and
productivity of SBI. It also studies Bank of Baroda and its Associates merger with Vijaya Bank and Dena bank, and this study discuss
the amalgamation held between the Punjab National Bank, Oriental Bank of Commerce and United Bank of India and this is the
largest amalgamation in the history of Banking sector took place on August 30, 2019.

1. Introduction Corporate Finance Theory are possible. In particular, we

propose to show the following:
The process of mergers and acquisitions has gained a) Banking M&A is a viable large impact strategy
substantial importance in today's corporate world. This b) Banking sector M&A is economical and needs a low
process is extensively used for restructuring the business barrier of Opportunity costs to execute and overcomes
organizations. In India, the concept of mergers and specific deal level outcomes that guarantee
acquisitions was initiated by the government bodies. Some
well known financial organizations also took the necessary M&A success:
initiatives to restructure the corporate sector of India by a) Reducing time to completion.
adopting the mergers and acquisitions policies. The Indian b) Larger deals are easy to consummate and extraordinary
economic reform since 1991 has opened up a whole lot of synergies realized with ease.
challenges both in the domestic and international spheres.
The increased competition in the global market has 2. Significance of Study
prompted the Indian companies to go for mergers and
acquisitions as an important strategic choice. The trends of The project helps in understanding the clear meaning of
mergers and acquisitions in India have changed over the merger and acquisitions in Indian banking sector. And also
years. The immediate effects of the mergers and acquisitions helps to know about the benefits of merger and acquisition
have also been diverse across the various sectors of the and effect of M&A of banks.
Indian economy. India has emerged as one of the top
countries with respect to merger and acquisition deals. In M&As have many potential benefits, which mainly focus on
2007, the first two months alone accounted for merger and boosting profits and shareholder value through:
acquisition deals worth $40 billion in India.  The economies of scale produced by increasing market
share.
Problem Statement  The expanded use of an existing distribution network by
Since the integration of Universal Banking memes in 1999, the acquisition of new product capabilities.
global mergers and acquisitions account for a significant  The extension of a strong product capability into new
proportion of value created in the industry. Banking M&A markets.
are large impact strategies that are frequently proved to be  The diversification of product and market risks.
counter-productive in the literature with contradictory results
in the US and the UK. Event studies have also become This way mergers and acquisitions become an essential tool
infrequent in the literature believing the worst to be true and for corporate development in today’ s global marketplace,
in line with the low Abnormal Returns for bidders being which is characterized by consolidation, convergence, the
contrary to the perceived and observed gains of synergy and competition for talent and technology, and the increasing
the attractiveness of the inorganic large impact strategies. importance of such intangible assets as knowledge, skills
We propose to investigate Indian Banking M&A in the and customer relationships.
available transactions and assume results consistent with
Volume 11 Issue 10, October 2022
www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: SR22928132109 DOI: 10.21275/SR22928132109 21
 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
SJIF (2022): 7.942
Objectives of the Study effect from different cases of banks merger and acquisition.
1) To critically analyze the impact of mergers and And also help to know about the recent trend in bank
acquisitions on the operating performance of the bank. merger.
2) To analyze the Impact of post-merger and acquisition
activities on the financial performance of banks. Research Design
3) To analyze the different motives behind merger and This is descriptive research design. As it is a review paper
acquisition. which studies the Merger & Acquisitions in Indian Banks.

Scope of the Study Sampling Design

The scope of the study is to find out the different motives I have reviewed 10 articles to analyze merger and
behind the merger and acquisition with the help of research acquisitions in Indian Banking Sector.
articles. Along with that it help to find out the post merger

S. No. Article Title

1. Study on the Merger of Andhra Bank and Corporation Bank with Union Bank of India
Impact of post-merger and acquisition activities on the financial performance of banks: a study of Indian private sector
2.
and public sector banks
3. Effect of Amalgamation on Financial Performance: A Case Study of Canara Bank Ltd
4. Merger & Acquisition of ICICI Bank with Bank of Rajasthan
5. Effect of Merger on Banking Sector-A Case Study Of SBI
6. Motives of merger and acquisitions in Indian Banking Sector.
7. Recent Mergers and Acquisition in Indian Banking sector-A Study
8. Merger and Acquisition in Banking Industry: A Case Study of Bank of Baroda.
9. Allahabad Bank’s Merger With Indian Bank: Can It Hit The Bulls Eye.
10. A Study Of Amalgamation Of Oriental Bank Of Commerce and United Bank of India Into Punjab National Bank.

Data Collection Method banks I found that acquisition activities of BOB (Barelly
Corporation Bank), OBC (Nedungadi Bank Ltd) and PNB,
Secondary Data the 6 year mean CR remains almost same between pre and
The mechanism involved in secondary data collection, post period, it indicating no improvement in the period of 5
mainly borrowing through adequate journal/ articles (related year after acquisition activities. So, it can be concluded that
to merger and acquisition), web portals, books, white papers. for longer time period also, the acquisition activity of BOB,
PNB and SBI has impact on their left-over earnings. At the
3. Limitations to the Study same time, the acquisition activities of BOB with Banaras
State Bank, HDFC with Times Bank, OBC with Punjab
 I have reviewed articles related to merger and acquisition Cooperative Bank / Bari Doab Bank and PNB with
of 5 years (2018-2022) Nedungadi Bank do not have any impact on ROCE.
 I have reviewed on merger and acquisition in only
banking sector.  From the study on Effect of Amalgamation on
 I have taken the case of Indian banking sector only. Financial Performance: A Case Study of Canara Bank
Ltd I found that there is no significant improvement in the
various ratios of Canara Bank in post amalgamation period.
4. Results & Discussion Canara Bank, the amalgamated company was unable to
encash the benefit of synergy in the short term. Re-pricing of
 From the study on the merger of Andhra bank and existing Canara Bank savings account deposits negatively
corporation bank with union bank of India I found that impacted on margins. But for a long term it will be
the amalgamation of Andhra Bank and Corporation Bank beneficial for Canara Bank. The amalgamated entity
into Union Bank of India has not resulted in any job loss and benefited from wider customer base, distribution network
instead employees have benefited from the amalgamation as and product suite, this would translate into higher cross
a result selling of Canara‟s products.
., The bank further informed that increased scale and
customer base in the region has enabled opening of
 From the study of Pre and Post Financial
additional regional offices and credit processing centers,
Performance analysis of Bank of Rajasthan and ICICI
equipping the bank for better serving customers of the
Bank after its Merger I found that in order to save Bank of
region. With customers of region benefiting due to increase
Rajasthan from complete Insolvency, this merger saved
in the number of bank branches and ATMs from which they
them. Continued loss of BOR through weak management as
may avail of banking services, larger bouquet of products
well ICICI Bank's ambition to achieve greater capacity with
and services through harmonization of the same across the
a little space and their endless desire the extension enables
three banks, and enhanced lending capacity for loans of
both banks to go on for a Merger. The results in this study
larger size due to increase in size of the balance-sheet.
indicate that post financial merger performance is better
when compared to the Pre Merger. Therefore, the Merger is
 From the study on Impact of post-merger and Beneficial for both the banks.
acquisition activities on the financial performance of
banks: a study of Indian private sector and public sector
Volume 11 Issue 10, October 2022
www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: SR22928132109 DOI: 10.21275/SR22928132109 22
 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
SJIF (2022): 7.942
 From the study of Effect Of Merger on Banking targets in future. Thus, the question still remains whether
Sector-A Case Study Of SBI, I found that there is not much this merger would succeed and realize its projected
difference in productivity as well as profitability in pre and synergies.
post merger period. However the total assets, liabilities and
employees as well as branches had increased significantly  From the study of A Study of Amalgamation of
due to merger. The slight decrease in the productivity Oriental Bank of Commerce and United Bank of India
indicator both employee wise and branch wise is mainly due into Punjab
to huge increase in branches and employees due to merger. National Bank I found that the Amalgamation between the
It is interesting to note that profitability as per spread and 3 Banks seems to be a value creator. It has lead to high
burden approach shows a positive response. However these CASA and lending capacity, and reach wider geographical
conclusions are just based on the observations on the study presence with 2nd largest branch network in India with 11,
and it’s too early to show exact impact of merger on SBI. 437 branches and 13856 ATMs across India and 12, 814
BCs to cater to a base of 18 crore Plus customer. The
 From the study of Motives of merger and acquisitions Amalgamation has drive the PNB to the 2nd largest Public
in Indian Banking Sector I found that After the economic sector Bank in the country with business of 17.95 Lakh
policy reforms and merger wave, number of changes has Crore. Despite challenges on the economy front, there was
been taken place in banking sector. Efforts were also made visible progress in the key parameter of core profitability,
by the banking sector to remain competitive in the assets quality and capital. This merger will play an important
globalized era. Government took initiatives regarding role in making India a $5 trillion economy by increasing
M&As also and is still in the process of announcing and their lending capacity so that they can provide better
implementing the consolidation activity. it was found that services using one of the modern technologies.
synergy was the main motive behind M&As. But there are
some other variables like advantages of diversification and 5. Discussion on findings of the study
faster market entry which triggers the merger. For increasing
market share, three motives i.e. strategic motives,  The most of the study reveal that some merger have the
performance motives and growth motives are most positive impact as it benefited from wider customer base,
significant. distribution network and product suite,
 Bank of Rajasthan saved from insolvency with the help
 From the study of A review on recent trends in bank of merger with ICICI Bank and that merger is also
merging system in India I found that in most of the M&A beneficial for ICICI Bank.
cases, in the long run the acquiring firms were able to  It was found that synergy was the main motive behind
generate value creation in one or the other form, that is M&As and For increasing market share, three motives i.
higher cash flows, cost cutting and greater market power, e. strategic motives, performance motives and growth
however in spite of improved financial performance sixty- motives are most significant.
four per cent of cases showed increased debt to equity ratio.  Bank of Baroda has experienced positive impact due to
It is also significant to note that profit before tax in all the merger.
merging cases has shown a positive trend for both financial  The merged entity had a leverage of the combined
sector companies. strengths of both Indian & Allahabad Bank. But, the
global crisis in the form of COVID 19 will have an
 From the study of Merger and Acquisition in Banking impact in the business of Indian Bank.
Industry: A Case Study of Bank of Baroda I found that  Amalgamation of Oriental Bank of Commerce and
after this three-way Merger, Bank of Baroda is become third United Bank of India into Punjab National Bank seem to
largest bank to serving at every part of nation and be a value creator.
strengthening the Indian Economy. Now it is concluded on
 But in some cases the acquisition activities of BOB with
the basis of Annual Report whether merged entity is
Banaras State Bank, HDFC with Times Bank, OBC with
navigating towards predefined goal. Overall, the mergers
Punjab Cooperative Bank / Bari Doab Bank and PNB
would help in better management of capital. Along with
with Nedungadi Bank do not have any impact on ROCE.
merger the focus should be on adequate reforms in
 There is not much difference in productivity as well as
governance and management of these banks. Finally the area
profitability in pre and post merger period in the merger
of service is more widened due to merger. Bank of Baroda
of SBI and its associates.
has experienced positive impact due to merger.

 From the study of Allahabad bank’s merger with 6. Conclusions

Indian bank: can it hit the bulls eye it reveals that: Indian
Bank is in a better position in comparison to Allahabad Bank In the emerging economies like India, the banking industry
in terms of Revenue, Net Interest Margin, Operating Profit, is one of the fastest rising industries. In India, the post-
Net Profit, ROE, ROTA, Segmental Performance as well as liberalization period has seen rapid development, one of
NPA Management & ALM. The merged entity had a which is banking. M&A in the banking sector has
leverage of the combined strengths of both Indian & demonstrated that this is the useful tool of merging into a
Allahabad Bank. But, the global crisis in the form of COVID larger Bank for the survival of weak banks. Our study shows
19 will have an impact in the business of Indian Bank. that the effects of the global economy are therefore difficult
Hence it is to be seen, how well Indian Bank copes up with for small and local banks, and that they need support and
the increased competition and successfully achieve its this is one of the reasons for their Merger. Whole study

Volume 11 Issue 10, October 2022

www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: SR22928132109 DOI: 10.21275/SR22928132109 23
 International Journal of Science and Research (IJSR)
ISSN: 2319-7064
SJIF (2022): 7.942
covers the effect of merger and acquisition in different
banks. In most of the cases it results positive impact on the [7] Dr Ravi. B. Recent Mergers and Acquisition in Indian
banks financial performance, it helps in increasing market Banking sector-A Study. JETIR July 2019, Volume 6,
share of the bank, it benefited from wider customer base, Issue 7. ISSN-2349-5162.
distribution network and product suite, and in some cases [8] Kashyap, Dr. Chetan, Merger and Acquisition in
that there is not much difference in productivity as well as Indian Banking Sector: A Case Study of Bank of
profitability in pre and post merger period. So it is Baroda (December 8, 2021). Available at SSRN: https:
concluded from the study is merger and acquisition have //ssrn. com/abstract=3980653 or http: //dx. doi.
different impact on Indian banking sector. org/10.2139/ssrn.3980653
[9] Sri. AYAN CHAKRABORTY. Allahabad Bank’s
7. Suggestions Merger With Indian Bank: Can It Hit The Bulls Eye.
International Journal of Multidisciplinary Research
The researcher would be focusing on the research carried out Review, Vol.6, Issue-6, June-2020,
with respect to the field of mergers and acquisitions. [10] Dr. Anshu Choudhary, Dr. Neha Vashistha. A Study
However since particular periods and scenarios would Of Amalgamation Of Oriental Bank Of Commerce
prevail at different point in times, it would be necessary for And United Bank Of India Into Punjab National
the research to be further enhanced. This research topic of Bank.2020 JETIR November 2020, Volume 7, Issue
analyzing the impact of mergers and acquisitions on the 11. (ISSN-2349-5162).
operating performance and financial performance of the
acquiring firm holds immense scope for further analysis.
This topic can be further studied by conducting research
using different variables or different set of sectors or
companies.

8. Directions for Future Research

1) Further study should be conducted on a broader scope.
2) Research should be conducted on other sector also.

References

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Volume 11 Issue 10, October 2022
www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: SR22928132109 DOI: 10.21275/SR22928132109 24