Restructuring and Consolidation in the Banking Sector

Aparna Pandey
Research Associate
Gujarat National Law University, GandhiNagar, India

Volume-1, Issue-2, 2018

The safest way to double your money is to fold it in over once and put it in your pocket.”      Frank McKinney Hubbard

The overall aim of this research paper is to focus on restructuring of banks by way of mergers and acquisitions. Indian Banks are observing growing NPA’s (Non-Performing Assets) due to the slowdown in the Indian economy and high interest costs.

The term, merger or acquisitions, is characterized, assessed and utilized diversely in various controls. For example, financial researchers suggest that merger is the type of market for corporate control that emerges because of financial, administrative, or innovation. Similarly, financial experts showed that acquisition is a decision of accounting experts whereas merger is a mix or amalgamation of at least two asset reports. Various factors are involved with mergers and acquisitions and they frequently require the inclusion of different consultants, for example, investment lawyers, legal advisors, accountants, and deal managers. Mergers and acquisitions can have extensive effects on the business group, the companies engaged, and the organizations’ workers, financial specialists, and customers. While, strategy analysts states that (M&A) is an inorganic development and fundamental option, which helps a business venture in accomplishing fast development than that of achieving usual progress. Truly, M&A idea is initially developed in the western part and from there on, eventually expanded in rest of the world because of innovation, economic integration and globalization.

The Indian Commercial Banking Sector, which has assumed a crucial part in the country’s monetary advancement, is now going through an energizing and challenging stage. With the commencement of economic modifications, the banking sector in India has set out upon mergers and acquisitions to catch the synergistic advantages like economies of scale and degree, even with increasing competition from local and also remote players and quick innovative improvements. A few research contemplates merger related review in keeping money and these investigations have received one of the two methodologies, in view of either book-keeping data or market costs. The main phase of the exploration assesses the effect of merger on money related execution of consolidating business banks in India by examining the bookkeeping construct data, for example, Return on Assets (ROA), operational costs and efficiency and productivity gains. A merger is required to improve execution of the amalgamation elements, if the following change in accounting based measures is superior to the change in the execution of similar banks that were not engaged with mergers. The findings demonstrate that while there is noteworthy distinction in a largest part of business and efficiency parameters before and after merger, the outcomes additionally point to the way that there is no huge contrast in a significant number operational and benefit factors. The outcomes are, best case scenario blended. The second phase of the exploration analyzes the post-merger efficiencies of the select business banks utilizing the non-parametric Data Envelopment Approach (DEA). It is better for the country to have less but healthier banks.

Keywords: Business, Mergers and Acquisitions, Banks, Economics, Money


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