MERGER OF BANKS : INDIAN PERSPECTIVE
Abstract
Financial intermediation is a vital component in supporting the country’s economic growth. The Indian banking sector has been constantly evolving and a major impetus came from the nationalisation of commercial banks with social objectives, subsequently, it has been witnessing a wide range of policy-induced reforms and structural changes since the early 1990s. A Bank merger is a situation where two banks combine their liabilities and assets to become one bank. Nearly every middle-market bank in India is planning to merge with another bank to expand its reach and gain new customers’ attention. Merging helps a financial institution to grow faster and achieve huge credibility in the market. A merger gives a financial institution more capital to work with and upscale their geographic reach in which they operate. If a small bank wants to achieve financial goals quickly, it is a great option for it. One of the significant benefits of bank mergers is that it reduces the weakness and gets the market’s competitive edge. In the merger process, the merging banks share information related to technology, cash, resources, data, etc.
The new steps toward consolidation of the public sector banks (PSB) are among the most distinguished events in the financial landscape of the country in recent years which would result in a major transformation, in line with the Narasimham Committee report (1991) to create a few but strong banks that can compete at the national as well as at the international level (Das, 2019). The paper, thus, upheld both the competition-stability as well as competition-fragility views for banks in India the paper provided evidence in support of the recent attempts at consolidation, merger among public sector banks and examined certain important aspects of concentration, competition and soundness of banks during the period.
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