Zoya Project

ACKNOWLEDGEMENT
I am Zoya Sufiyan Farooqui, a student of Department of Business Management Studies, A. E.

Kalsekar Degree College. I am sincerely thankful to all my professors who gave their valuable
guidance to make the report in the best way and giving me the much-needed support and full
cooperation for making my project report
I would like to extend my gratitude to A. E. Kalsekar Degree College and University of

Mumbai, for giving me the opportunity to increase our practical knowledge in the field of
mergers & acquisitions in Indian Banking Sector. I also thank all the professors and staff of the
institute for their valuable guidance and help throughout the project.
TABLE OF CONTENTS
Sr. No Contents Page Nos
EXECUTIVE SUMMARY
The project aims to understand the various “Mergers and Acquisitions in Indian Banking
Sector” A large number of international and domestic banks all over the world are engaged in
merger and acquisition activities. One of the principal objectives behind the mergers and
acquisitions in the banking sector is to reap the benefits of economies of scale. In the recent
times, there have been numerous reports in the media on the Indian Banking Industry Reports
have been on a variety of topics. The topics have been ranging from issues such as user
friendliness of Indian banks, preparedness of banks to meet the fast-approaching Basel II
deadline, increasing foray of Indian banks in the overseas markets targeting inorganic growth.
Mergers and Acquisitions is the only way for gaining competitive advantage domestically and
internationally and as such the whole range of industries are looking to strategic acquisitions
within India and abroad. In order to attain the economies of scale and also to combat the
unhealthy competition within the sector besides emerging as a competitive force to reckon with
in the international economy. Consolidation of Indian banking sector through mergers and
acquisitions on commercial considerations and business strategies – is the essential pre-
requisite. Today, the banking industry is counted among the rapidly growing industries in India.
It has transformed itself from a sluggish business entity to a dynamic industry. The growth rate
in this sector is remarkable and therefore, it has become the most preferred banking destinations
for international investors‟. In the last two decade, there have been paradigm shift in Indian
banking industries. The Indian banking sector is growing at an astonishing pace. A relatively
new dimension in the Indian banking industry is accelerated through mergers and acquisitions.
It will enable banks to achieve world class status and throw greater value to the stakeholders.
INTRODUCTION
Mergers and acquisition are having both the aspects of the strategic management’s corporate
finance and management dealing with the buying of selling dividing and combining the
different companies of the similar entities. After the merger the result is the transact the
ownership and a control of a firm to another.
M&A is defined as a restructuring of the result in some entity reorganization with havingthe
aim to provide growth or positive value. The consolidation of an industry or the sector that
occurs when the wide spread M&A activity concentrates the resources of many small
companies into a few larger ones such as occurred with the automotive industry between 1910
to 1940.
MERGER
Merger is defined as combination of two or more companies into a single company where one
survives and the others lose their corporate existence. The survivor acquires all the assets as
well as liabilities of the merged company or companies. Generally, the surviving company is
the buyer, which retains its identity, and the extinguished company is the seller. Merger is also
defined as amalgamation. Merger is the fusion of two or more existing companies. All assets,
liabilities and the stock of one company stand transferred to Transferee Company in
consideration of payment in the form of:
• Equity shares in the transferee company

• Debentures in the transferee company
• Cash, or a mix of the above modes.
What is Merger?
• A merger is an agreement that unites two existing companies into one new
company.
• Mergers are commonly done to expand a company’s reach, expand
into newsegments, or gain market share.
• All of these are done to please shareholders and create value.
• Merger is covered regulated/covered by the companies Act, 1856.
Merger are been refers by finding an acceptable partners, determining upon how to pay each
other and also ultimately creating a new company, which is a combination of both the
companies.
TYPES OF MERGERS
Merger or acquisition depends upon the purpose of the offeror company it wants to achieve.
Based on the offerors‟ objectives profile, combinations could be vertical, horizontal, circular
and conglomeratic as precisely described below with reference to the purpose in view of the
offeror company.
A. Vertical combination:
A company would like to take over another company or seek its merger with that company to
expand espousing backward integration to assimilate the resources of supply and forward
integration towards market outlets. The acquiring company through merger of another unit
attempts on reduction of inventories of raw material and finished goods, implements its
production plans as per the objectives and economizes on working capital investments. In other
words, in vertical combinations, the merging undertaking would be either a supplier or a buyer
using its product as intermediary material for final production. The following main benefits
accrue from the vertical combination to the acquirer company i.e. 1. It gains a strong position
because of imperfect market of the intermediary products, scarcity of resources and purchased
products; 2. Has control over products specifications.
B. Horizontal combination:
It is a merger of two competing firms which are at the same stage of industrial process. The
acquiring firm belongs to the same industry as the target company. The main purpose of such
mergers is to obtain economies of scale in production by eliminating duplication of facilities
and the operations and broadening the product line, reduction in investment in working capital,
elimination in competition concentration in product, reduction in advertising costs, increase in
market segments and exercise better control on market.
C. Conglomerate Combination:
It is amalgamation of two companies engaged in unrelated industries like DCM and Modi
Industries. The basic purpose of such amalgamations remains utilization of financial resources
and enlarges debt capacity through re-organizing their financial structure so as to service the
shareholders by increased leveraging and EPS, lowering average cost of capital and thereby
raising present worth of the outstanding shares. Merger enhances the overall stability of the
acquirer company and creates balance in the company’s total portfolio of diverse products and
production processes.
D. Circular Combination:
Companies producing distinct products seek amalgamation to share common distribution and
research facilities to obtain economies by elimination of cost on duplication and promoting
market enlargement. The acquiring company obtains benefits in the form of economies of
resource sharing and diversification.
E. Congeneric Combination:
Congeneric merger is also known as Product Extension merger. When the two or more
companies are operating in the same market or sector with overlapping factors, such as
technology, marketing, production process, research & development. a product extension
merger is been achieved when a new product line from one company is been added to an
existing product line of the other company.
REASONS OF MERGERS
➢ A key reason of bank merger is the weight of mounting bad loans over the years.
➢ Its creating globally stronger banks that doing away with needless overlaps in the operations
and infrastructure.
➢ In economies of scale to be bring down costs that have always been at the heart of any
consolidation drive.
➢ They aimed at the improving operating efficiency, accountability, governance and facilitate
effective monitoring.
➢ They also aimed at creating next generation banks with a strong national presence andthe global
outreach accompanied to enhanced capacity to increase the credit to the various important
sectors of the economy.
MERITS AND DEMERITS OF MERGERS
MERITS:
 A large capital base would help the acquirer banks to offer large loans amount.
 This merger makes RBI to have better control on the system and the implementation of policies
becomes easy.
 There will be easy penetration into the market.
 Technological upgradation can be considered.
 Recapitalization need from the government to reduce.
 The cost of operation will reduce with the help of merger.
 The professional standard can be improved.
 It helps in improving the risk management.
 The geographically concentrated regionally present the banks to expand their coveragewith the
help of merger.
 It provides better efficiency ratio for the business of operations as well as the banking operation
which is beneficial for the economy.
 Service delivery can be get improved with the help of merger.
 RBI can watch banks on its performance, especially in the terms of NPA (Non- Performing
Asset) otherwise loans which are not recovered.
 Customers will have a wide range of products like mutual funds and insurance to choosefrom the
additional to the traditional loans and deposits.
 It NPA percentage of the bank is above prescribed norms, it will ask to merge with a bigger
bank to the case the situation as to combined capital of banks that will be higherand thereby
reducing the NPA percentage.
DEMERITS:
 All different banks have different culture, systems, processes, procedures and thatmerger
will lead to clash of organizational cultures.
 Bank officials and unions of PSBs are against the merger due to the issues with the
employment, security, tenure, etc.
 There are few large inter-linked banks that can expose the broader economy to enhanced
financial risks.
 Employees of the larger bank does not be give equal treatment to the employees of the smaller
bank into new and the merged bank.
 The local identity of small banks is not that big.
 There is materialized and that the customers feel harassed initially that the banks are working
on it.
 It will take some time to the customers to know that their banks are merged. Even though it’s
mandatory for the banks to inform to all their customer about the merger some customer may
miss the communication and get panic to see their branch board is replaced with the new one.
 Acquiring banks have to handle the burden of weaker banks, resulting in risk exposure.
 It is difficult to manage the culture and people of different banks.
 The idea of decentralization as many banks that have a regional audience to cater andcustomers
often the respond very emotionally to the banks acquisition.
 The large banks are more vulnerable to the global economic crises that bail outs cripplethe entire
country’s economy.
 It too many mergers of banks and there by the customers that will have the less choice tobank.
 The governing board of the new bank which could lead to employment issues that thecoping
with the staffers disappointment that could be another challenge.
ACQUISITION
Acquisition in general sense is acquiring the ownership in the property. In the context of
business combinations, an acquisition is the purchase by one company of a controlling interest
in the share capital of another existing company.
Methods of Acquisition
An acquisition may be affected by-
➢ Agreement with the persons holding majority interest in the company management like
members of the board or major shareholders commanding majority of voting power.
➢ Purchase of shares in open market.
➢ To make takeover offer to the general body of shareholders.
➢ Purchase of new shares by private treaty
➢ Acquisition of share capital through the following forms of considerations viz. Means of cash,
issuance of loan capital, or insurance of share capital.
OVERVIEW OF INDIAN BANKING SECTORS
In modern economy the importance of banks cannot be neglected. Banking sector plays a vital
role in the economic development of the country. Banking sector are a financial institution,
which perform as various function like accepting deposits, lending loans to agricultural &
industrial concerns.
The banking industry worldwide to be transformed concomitant with a paradigm shift in the
Indian economy from manufacturing sector to nascent service sector. Indian Banking is as a
whole in the undergoing changes. Indian banks have always proved beyond the doubt that
adaptability to themselves into an agile and resilient organization.
The Banking sector has been seen ongoing mergers & amalgamation in recent years. The
Reserve Bank of India (RBI), the Central Government can create a scheme for the
amalgamation of any nationalized bank with any other nationalized bank or banking sector in
accordance with the banking companies Acts 1970 and 1980 (Acquisition and Transfer of
undertaking).
From the past three decades India’s banking system that has several outstanding achievements
to its credit. The most striking is it extensive reach. Indian banking system has reached even to
the remote corners of the country. One of the main reasons of India’s growth process is that the
Indian banking system has reached even to the remote corners of the country.
Previously an account holder had to wait for hours and hours at the bank counters for getting a
draft or withdrawing his own money. But today they have a choice. Further the most efficient
bank transferred money from one branch to another branch in two days. But now a days it is
simple as instant messaging or dials a pizza. Money has become the order of the day.
In India banks are playing a crucial role in the socio-economic progress of the country afterthe
independence. Indian banks have been going through a fascinating phase through the rapid
changes that brought about by the financial sector reforms, which have been implemented in a
phased manner.
The current process of the transformation that should be viewed as an opportunity to convert into
an Indian banking that sound, strong and vibrant system capable of playing its role efficiently
and effectively on its own without imposing any burden on government.
The government has announced after the liberalization of the Indian economy that a numberof
reforms is measures on the basis of the recommendation of the Narasimhan Committee to make
a banking sector economically viable and competitively strong.
1.1 Mega Bank Mergers List in India 2019 to 2020
AcquiringBank Acquired Bank Year of a merger
Bank of Vijaya Bank, April 1, 2019

Baroda Dena Bank
Punjab Oriental Bank of April 1, 2020

National Bank commerce,
United Bank of
India
Canara Bank Syndicate Bank April 1, 2020
Union Bank of Andhra Bank, April 1, 2020

India Corporation Bank
Indian Bank Allahabad Bank April 1, 2020
• Union Finance Minister Nirmala Sitharaman on 30th August 2019 she announced the
consolidation of the State-owned banks (PSBs) in which 10 PSBs being the merged toform 4
bigger lenders to the strengthen the banking sector struggling with a bad loan.
• The aimed at clean-up of the bank balance sheets and creating the lenders of global scalethat
can be support the economy’s surge to$5 trillion by 2024.
• Done with two rounds of the bank consolidation earlier, this is what we want to do for the
robust banking system and a $5 trillion economy.
• FM Sitharaman said that they are trying to build next generation banks, big banks withthe
capacity to the enhance credit.
• The key factors for the mergers are the technological platform, cultural similarities, customer
reach, competitiveness, finance secretary Rajiv Kumar added.
MERGER 1
History of Bank of Baroda, Vijaya Bank and Dena Bank
1.1 Bank of Baroda
• On 20th July 1908, the Bank of Baroda was established as a private bank by theMaharaja of
Baroda, Maharaja Sayajirao Gaekwad lll.
• Headquarter of Bank of Baroda is in Gujarat in Vadodara formerly known as Baroda.
• In Maharashtra in Mumbai BOB has its corporate office. In the year 1910, the Bank of Baroda
as also opened their branch in Ahmadabad city.
• On 19 July 1969, Bank of Baroda is nationalized by the Government of India,along with
the 13 other major commercial banks of India.
1.2 Vijaya Bank
• Vijaya Bank was established on 23 October 1931 by late Shri. A.B Shetty and other
entrepreneurial farmers of Bangaluru in Karnataka.
• On 15th April the Vijaya Bank was nationalized. It has corporate office in Karnatakain
Bengaluru.
• In 1958 the bank became a scheduled bank.
• Its merger with nine smaller banks on 1969-1968 to grew steadily into a large IndiaBank.
1.3 Dena Bank
• Dena Bank was established on 26 May 1938 by Devkaran Nanjee’s family underthe name
of Devkaran Nanjee Banking company Ltd.
• On December 1939, Dena Bank adopted its new name by Dena (Devkaran Nanjee)Bank due
to become a public company.
• Dena Bank Ltd was nationalized along with 13 other major banks and it became aPublic
Sector Bank on July 1969.
• It has it headquarter in Mumbai Maharashtra.
AFTER MERGER OF BANK OF BARODA, VIJAYA BANK & DENA BANK
• On September 17, 2018 the Narendra Modi Government announced plans to mergerthree public
sectors banks Mumbai based Dena Bank. Bengaluru’s Vijaya Bank andthe Bank of Baroda that
has its head office in Vadodara Gujarat.
• The merger entity legal asserts of over Rs 14 lakh crore, it will be India’s third largestlender
behind the State Bank of India and HDFC Bank.
• On 2 January 2019, the government of India approved the merger of Bank of Barodawith Vijaya
Bank & Dena Bank. Under the terms of the merger, for every 1000 shares of Dena Bank &
Vijaya Bank shareholders received 110 & 402 Bank of Baroda equity shares, respectively, of
face value. Vijaya bank & Dena bank are merger into Bank of Baroda from 1st April 2019.
• The government has agreed to grant some Rs 5,042 crore to Bank of Baroda to strengthen the
merger financial position.
• Due to the merger of Bank of Baroda its ranks second in India in terms of number of branches.
The number of banks kept under the prompt corrective action framework by the RBI to four.
• Dena bank is among the five PSU banks kept under PCA watch over burgeoning losses and
NPAs. It is based on the third quarter results of Dena bank & Vijaya bank
, the key credit metrics of the merger entity, with the exception of profitability, willbe broadly
similar to that of Bank of Baroda, according to a Moody’s report. It alsopredicts that Bank of
Baroda’s profitability will be dragged down by the NPAs of the other two banks. As per the
market reports, cultural integration of the three banks is been likely to remain an overhang on
the bank’s nearby term performance. The back – end technology integration would, however
to be relatively smooth asall the three banks operate on the Finacle CBS platform.
• The Bank of Baroda is set 7,000 crores as a capital.
• The agenda of this merger was to reduce non-performing assert (NPA). At the time ofthe merger
proposal the gross NPA ratio of Bank of Baroda, Vijaya bank & DenaBank were 12.4%, 6.9%
& 22% respectively. Before the merger of Bank of Baroda,the entity would 40% more deposits
and 44% more loans, but it would also have 70% more distribution. So, there would be more
products and services available to customers after merger. The total business of Bank of Baroda
is expected to be morethan Rs 15 trillion after merger. The sign of merger is expressing through
this Financial Analysis.
MERGER 2
HISTORY OF PUNJAB NATIONAL BANK, ORIENTAL BANK OF COMMERCE
&UNITED BANK OF INDIA
1.1 Punjab National Bank

• Punjab National Bank was founded on 19th May 1894. It is an Indian Multinational Banking
and financial services company.
• The several leaders are including the state-owned corporation of Punjab National Bank was
based in New Delhi, India.
• It covered over 80 million customers, 6937 branches & 10681 ATMs across 764 cities.
According to RBI, among state run banks in India, Punjab National Bank topped in thenumber
of loan fraud cases across the India.
1.2 Oriental Bank of Commerce

• Oriental Bank of Commerce was established on 19th Feb 1943 in Lahore and it wasfounded
by Late Rai Bahadur Lala Sohan Lal, the first chairman of the bank.
• On 15th April 1980 it was nationalized.
• The bank newly branches was formed in Pakistan that had to be closed down and the
registered office was shifted from Lahore to Amritsar.
• The bank has a network of 530 branches and 505 ATMs spread throughout the India, and out
of which 490 branches offer centralized banking solutions.
1.3 United Bank of India

• United Bank of India was established on 1959.
• It first branch was establish at Karachi.
• Union Bank was merged as United Bank.
• It has more than 1300 branches and it has 15 overseas branches.
• United Bank of India has a good track record of 56 years.
• United Bank of India has over all assets of Rs. 300 billion.
AFTER MERGER OF PUNJAB NATIONAL BANK, ORIENTED BANK OF

COMMERCE & UNITED BANK OF INDIA
• On 1st April 2020 Punjab National Bank (PNB) will take over Oriental Bank of Commerce
(OBC) and United Bank Of India (UBI) and to become the country’s secondlargest lender
after State Bank Of India (SBI) in terms of business and branch network.
• The biggest chunk of recapitalization that will go to PNB at Rs 16,000 crore, followedby
Union Bank at Rs 11,700 crore this two anchor banks for the merger.
• The synergy after the amalgamation will create a globally competitive in the next
generation bank, PNB 2.0 the bank said that in a release and the added that all customers,
including depositors, will be treated as the PNB customers.
• PNB 2.0 will be offering specified inter-operable services through all the branches andall
the platforms including mobile and internet banking it added.
• The amalgamated bank will be a wider geographical reach through 11,000 plusbranches,
more than 13,000 ATMs, 1 lakh employees and a business mix of over Rs 18 lakh crore.
• SS Mallikarjuna Rao, MD & CEO of Punjab National Bank that “The bigger geographical
footprint will help us to serve our customers more effectively and efficiently”.
• The lender said that it has appointed ‘Bank Sathi’ at all the branches, zones, head officethat
will address the customer concerns and assist them in choosing the right products and
services.
• It will also smoothen the customer transition, it added. A robust risk governance mechanism
has been set up to mitigate risks and to make the banking experience secureand safe, PNB
noted,
• PNB has unveiled a new logo following the merger of United Bank of India and Oriental
Bank of Commerce with it.
• The new logo will be bear distinct signages of all the three public sector lenders.
MERGER 3
HISTORY OF CANARA BANK & SYNDICATE BANK
1.1 Canara Bank

• Canara Bank was established on 1906 by Subba Rao Pai and it was known Canara
Hindu Parliament fund in Mangalore.
• In 1910 the bank changed its name to Canara Bank.
• In 1969 this bank was nationalized.
• In 1979 Canara Bank inaugurated its 1000th branch.
• Canara Bank became the 1th Indian Bank to get ISO certificate in 1996 for the ‘Total
Branch Banking’ for its Seshadripuram Branch in Bangalore.
1.2 Syndicate Bank
• Syndicate Bank was established on 1925 in Udupi, Karnataka it is the oldest and major
commercial banks of India. During the time of it established the bank was known as Canara
Industrial and Banking Syndicate Ltd.
• By the three visionaries Shri Upendra Ananth Pai. A businessman, Shri Vaman Kudva, an
engineer and Dr.T M A Pai, a physician with a intention to provide financial support to the
local weavers.
• Syndicate Bank was nationalized in 19 July 1969 by the government of India.
• The headquartered of this bank was in the university town of Manipal India.
• It has 13 major commercial banks of India.
• The bank objective was to primarily to extend financial assistance to the local weavers.
AFTER MERGER OF CANARA BANK & SYNDICATE BANK
• On 1th April 2020, the Syndicate Bank was merged with Canara Bank.
• After the merger Canara Bank has become the India’s fourth largest public sector bank.
• Canara Bank has taken over Syndicate Bank by which the shareholders pf Syndicate
Bank get 158 shares for every 1000 shares of Canara Bank.
• After merger the banks will have 10,342 branches and 12,829 ATMs and Canara Bankalso
worth 15.20 lac crore.
• They have a combined strength of 91,685 employees.
• The merger of this banks shall massively enhance the reach of banking sector to thelarger
public and the financial inclusion activities currently underway.
• The integration would lower operating costs because of network overlap.
• After the merger these two banks has identical work cultures, and it is possible a
seamless integration.
MERGER 4
HISTORY OF UNION BANK OF INDIA, ANDHRA BANK & CORPORATION
BANK
1.1 Union Bank of India

• Union bank of India was registered on 11th November 1919 and it has limited company in
Mumbai and it was inaugurated by Mahatma Gandhi.
• ATMs was introduced firstly in India by union bank of India.
1.2 Andhra Bank

• Andhra bank is an Indian public sector bank.
• Andhra bank was registered on 20th November 1923.
• Andhra bank was founded by the eminent freedom fighter and the multifaceted genius, Dr.
Bhogaraju Pattabhi Sitaramayya.
• It has more than 1900 branches, 15 extension counters and also more than 1100automated
teller machines.
• It has operated in 25 states and three Union Territories.
• Andhra bank has its headquarters in Hyderabad, India.
• Andhra bank has pioneer in introducing credit cards in the country in 1981.
1.3 Corporation Bank
• Corporation bank was founded in the year 1906 in Udupi in a small town of South India.
• In 1980 Corporation Bank was Nationalized and been public in 1998.
• Corporation Bank holds a unique record of posting profits right from inception.
• FY 2010-11 uninterrupted dividend payment track record since inception and declared highest
ever dividend of 200%.
AFTER MERGER OF UNION BANK OF INDIA, ANDHRA BANK &

CORPORATION BANK
• On 1st April 2020 Andhra Bank, Corporation Bank merge into Union Bank of India.
• The central government is in exercise of the powers conferred by section 9 in the banking
companies Act 1970/1980 after consultation with RBI notified theamalgamation of Andhra
Bank and Corporation Bank into Union Bank of India Scheme 2020.
• Union Bank has become the country’s fifth largest public sector lender after amalgamating
Andhra Bank and Corporation Bank into Union Bank.
• From Wednesday the merger effective with harness rich individual legacies and forge a
dynamic shared future.
• After the merger all the employees, customers, and branches of Andhra Bank and
Corporation Bank will become the part of the Union Bank of India.
• The merger is also the expected to generate cost and revenue synergies to the tune ofINR
2,500 crores over the next three years.
• The customers get the benefit of wider access to branches, ATMs, digital services andcredit
facilities and also now in a much stronger position as a bank.
• The banks also offer a wide range of products and services to more than 120 million
customers across its over 9,500 branches and more than 13,500 ATMs.
• After combined they becomes the India’s fourth largest banking network and fifth
largest public sector bank.
• In order to minimize disruption, the account numbers, IFSC codes, debit/credit cards and
internet / mobile banking portals and login credentials will remain the same.
MERGER 5
HISTORY OF INDIAN BANK & ALLAHABAD BANK
1.1 Indian Bank

• On 15th August 1907 Indian Bank was established as a part of the Swadeshi movement.
• It serves the nation with a team of over 18,782, dedicated staff of total business crossed Rs
2,11,988 crores as on 31th March 2012, operating profit has increased to Rs 3,463.17 crores
on 31th March 2012, Net profit has increased to Rs 1746.97 crores on31th March 2012.
• It has also overseas branches in Singapore, Colombo including a foreign currency of banking
unit at a Colombo and Jaffna and 240 overseas correspondent banks in 70 countries.
1.2 Allahabad Bank
• In 1865 Allahabad bank was started in Allahabad and its headquarters of Allahabadbank
was in Kolkata.
• The first directors of the banks are Mr.G.Brown, Mr.T.Moss, Mr.S.Bird and Mr. A . W
. Wollaton.
• Allahabad Bank is the nationalised bank which has the more than 2500 branches acrossthe
India.
• In the year 2013 it has the total business of 3.1 trillion and it has branches across theworld
in Hong Kong and Shenzen.
• Allahabad bank is the oldest joint stock bank of the country.
It has set up in Allahabad on 24 April 1865 by a group of Europeans.
AFTER MERGER OF INDIAN BANK & ALLAHABAD BANK
• On 1st April 2020 Allahabad Bank merger into Indian Bank.

• Finance minister Nirmala Sitharaman had announced the merger of several public
sectorbanks in Budget 2020 held in March last year.
• The Indian banks announced a share of swap ratio of 115 equity shares of Rs 10 each
for every 1,000 shares of Rs 10 each of Allahabad Bank. as per the scheme the
Allahabad Bank was amalgamated into Indian Bank along with other nine PSBs
mergedinto four.
• Allahabad Bank has its headquartered in Uttar Pradesh’s Allahabad initially. In
presence of Gwalior district of Madhya Pradesh 45 years ago. Now its headquarters
was later shifted to Kolkata after 20 years of establishment.
• Allahabad bank has the largest number of fixed assets as to compared with other
banks. It has the largest number of 3,230 branches across the country primarily
located in UP, Bengal in the second position, Bihar in the third position and Madhya Pradesh
at fourthwith 150 branches.
• It was announced that a fair equity share exchange ratio of 115 equities of Rs 10 each
for every 1000 shares of Rs 10 of Allahabad Bank as a part of the merger of the latter
in the bank.
• The board of directors, approved in the meeting that the share exchange ratio, subject to
statutory and the regulatory approvals.
• A grievance redressal committee headed by the retired judge of Madras High Court, Chitra
Venkataraman was formed to be address the grievances of minority of shareholders
individually and collectively holding at least one percent of the total paid-up equity capital of
one of these two banks.
REVIEW OF LITERATURE
Sanjay Sharma & Sahil Sidana(2017)

In this research paper it expressed the impact of SBI merger on financial condition of SBI. The SBI will
get visibility at global level in the network increase of SBI & it is also able to provide cheaper funds
more easily. The gross & net NPA of SBI it will come down after merger with their associate. The
efficiency & effectiveness of the business it will increased because of single management.
Kotnal Jaya Shree (2016)

In this research paper it expressed “the economic impact of merger and acquisition on
profitability of SBI” it various motives of merger in Indian Banking Industry. It was compares
pre and post merger financial performance of merging banks with the help of financial
parameters like gross profit margin, net profit margin, operating profit margin, return on equity
and debt equity ratio. Finally it express that the banks have been affected positively but the
overall development and financial illness of the banks can’t solved through mergers and
acquisitions.
Prof. Ritesh Patel & Dr. Dharmesh Shah(2016)

In this research paper it compared the financial performance of before and after merger of banks
through Economic value added approach and through others financial paramenter like net profit
margin, return on net worth , return on asserts, return on long term funds , interest earned and
total assets and it is not necessary that EVA approach is common for all the other banks. They
concluded that the financial performance od bank may be improved after the merger. But if it
past financial data are examined before merger, it can be make merger fruitful.
Parveen Kumari(2014)
In this research paper it considered the merger and acquisition of banks as strategic approach
and told that the aim of the merger and acquisition of banks is increase credit creation and make
progressive. According to the gathered post merger data she concluded that the number of
branches & ATM, Net Profit , Deposit , Net worth have increased.
S. Devarajappa (2012)
This study is destined in identifying the various reasons for merger and acquisitions in India.
It also focused on pre and post merger performance of banks from the view point of return on
investment, ROCE, ROE. And this merger effect the helpful for surving of week banks by
merging into larger banks.
Ramon, A.A.,Onaolapo and Ajala, O. Ayorinde(2012)

In this research they examined the effects of merger and acquisition on the performance of
selected commercial banks in Nigeria . on the basis of gross earning , profit after tax and deposit
profit was chosen as financial efficiency parameters for the purpose of the study. The findings
indicated an enhanced financial performance leading to improved financial efficiency. The
study is recommended that the banks should be more aggressive in marketing financial
products and also manpower training and re-training, investment in information technology
should be emphasized.
Azeem Ahmed Khan(2011)
In this study , the researcher focused on explain the various motives for mergers and acquisition in
India. The results of this study witnessed that mergers and acquisitions helped in declaration of
dividends to equity share holders.
Nisarg A Joshi and Jay M Desai

In this study it measured the operating performance and shareholder value of acquiring their
performance before and after the merger. The ratio analysis is used on the basis of operating profit
margin, Gross operating margin, Net Profit Margin, Return on capital employed , Return on Net Worth,
Debt-equity ratio, and EPS P/E for studying the impact. They also concluded the previous studies ,
mergers do not improve performance atleast in the immediate short term.
Bhan Akhil (2009)

In this research paper it insight into the motives and benefits of the mergers in Indian banking sector.
This study examined eight merger deals of the Indian banks during the period of 1999 to 2006. The
results of the study is indicated that mergers have been efficient for the merging banks and they have
also created a value for the acquiring banks. Further it was concluded that in the Indian Banking context
the effect of mergers is not seen over a short period of time but over a considerable period of time.
RESEARCH METHODOLOGY
1.1 Problem statement

• The banking industry has been experiencing major Merger and Acquisition in the recent years,
with the number of global players emerging through successive Merger and Acquisition in the
banking sectors. Only in today’s tough environment will large organizations thrive.
Government banks are in bad condition following demonetization. A lot of government banks
have incurred huge losses owing to bad loans, which the lenders have not been willing to
recover because they have ruined their company due to a range of factors, including
demonetization. They have been discussions of the closing of certain banks because, in such a
case, the general public may have withdrawn deposits from their accounts in a very risky
circumstance. So , instead of shutting certain banks, the government , in consultation with RBI,
it has taken a brave decision to merge banks through large- scale economy operations. By
merging many public sector banks into few and with efficient resources development, banks
can be reinforced with a focus on upgrading services and revenues, optimum utilization of staff,
cost efficiencies and reduced NPAs . Therefore, the study is taken up to know more details
1.2 Research objectives

• To study the pre and post merger financial performance of Bank OF Baroda
• To study the pre and post merger financial performance of Punjab National Banks
• To study the pre and post merger financial performance of Canara Bank
• To study the pre and post merger financial performance of Union Bank
• To study the pre and post merger financial performance of Indian Bank
1.3 Significance of the study

• The study is significant and useful as it has given the experience and knowledge about the
merger and acquisition in Indian banking sector and what are its impact on the financial
performance of the bank
1.4 Sources of data collection

• The study is purely based on secondary data taken from the annual reports of selected units and
other websites.
• All the data related to history , growth and development of selected banking industries, it is
been collected mainly from the books and magazine related to the banks and published papers,
reports, articles and from the various newspapers, and other journals.
1.5 Selection of sample

Sample size:- 3 Mega Bank Mergers List in India 2019 to 2020
Acquiring Bank Acquired Bank Year of a merger
Bank Of Baroda Vijaya Bank, April 1, 2019

Dena Bank
Punjab National Oriental Bank Of April 1, 2020
Bank commerce,
United Bank Of India
Canara Bank Syndicate Bank April 1, 2020
Union Bank Of Andhra Bank, April 1, 2020
India Corporation Bank
Indian Bank Allahabad Bank April 1, 2020
1.6 Tools of analysis
• In this study SPSS Software is been used as statistical tool .
• This study is based on Ratio Analysis and Paired Sample T-Test
1. RatioAnalysis
Ratio analysis is the important technique of financial analysis which shows the arithmetical
relationship between any two figures. A ratio , in general , is a statistical yardstick by means
of which the relationship between the figures can be compared and measured.
The ratios are operating profit ratio, net profit ratio, return on assets, return on equity ratio, cost
to
income, debt equity ratio, CASA ratio,
2. Statistical Analysis
In this study mean, difference and standard deviation as tools of statistical analysis and
paired t-test for judging hypothesis.
Paired T-test
Paired t-test is the way to test the comparison between two related samples, involving small
values of n that does not require the variances of the two population to be equal, but the two
population are normal that must be continue to apply. For a paired T-test it is necessary that the
observation of the
1.7 hypothesis of the study Null Hypothesis:

There would be no significant difference in mean score of selected units, before and after
merger
and acquisition.
Alternate Hypothesis:
There would be significant difference in mean score of selected units, before and after
merger and acquisition .
1.8 limitation of the study

• This study is purely based on only 5 selected banks.
• In this study the pre and post data of the selected merger banks are used.
• All the limitations of ratio analysis affect the study
• All the limitations of secondary data make an impact in the analysis because this study is
based on the data only
• For this study before and after merger 1 year data is been compare of selected units.
DATA ANALYSIS
1) Operating Profit Ratio
• Operating Profit Ratio = Operating Profit/Net Sales x 100
• Operating Profit Ratio is calculated by adding non-operating expenses and deducting non-
operating income from net profit.
• It is typically measures the operating performance and the efficiency of thecompany.
• The poor operational performance of the company is been analysis in which there
is higher net profit ratio but the lower operating profit ratio.
• The profit is been increased because of other income and not the due.
Table 1
Operating Profit Ratio in selected Unit
Bank Name
Before Merger (x) After Merger (y) Difference (x-y) Square Of
Difference (x-y)^2
BOB -20.82 -11.77 -9.05 81.9025

PNB -33.81 -16.61 -17.2 295.84
CB -13.30 -20.53 7.23 52.2729
UBI -23.24 -23.55 0.31 0.0961
IB -26.19 -22.83 -3.36 11.2896
Total -22.07 441.4011
(source : Moneycontrol.com)
Operating Profit Ratio

-40
-30 -33.81
-20 -26.19
-23.2-423.55 -22.83
-20.82 -20.53
-16.61
-10 -13. 3
-11.77
0
BOB PNB CB UBI IN
Before Merger After Merger

➢ Analysis
• In this above chart of operating profit ratio in which Bank Of Baroda has lower ratio (-
11.77) after the merger and it has highest ratio (-20.82) before the merger.
• Punjab National Bank has highest ratio (-33.81) before merger and it has lower ratio (-
16.61) after merger.
• Canara Bank has highest ratio (-20.53) after merger and it has lower ratio (-13.3) before
merger.
• Union Bank Of India has highest ratio (-26.19) before merger and it has lower ratio (-
22.83) after merger.
• Indian Bank has highest ratio (-26.19) before merger and it has lower ratio (-22.83)
after merger.
Table 1.1
Analysis of t-test in selected units under the study of operating profit ratio
N Means S.D d.f t-test p-vales Result

5 x Y xy x Y XY
-23.47 -19.05 -4.41 7.49 4.89 9.27 4 -1.064 0.347 Ho
• Null Hypothesis: (Ho)
Their would be no significant difference in mean score of selected units, before and after merger
and acquisition.
• Alternate Hypothesis: (H1)
There would be significant difference in mean score of selected units, before and after merger
and acquisition.
At 5% level of significance, here t= -1.064 and p value = 0.347 So, t<p
As t is less than p value so Null Hypothesis is (Ho) is accepted means there is no significant
difference in mean score of selected units, before and after merger & acquisition.
2) Net Profit Ratio

• Net Profit Ratio = Net Profit / Net Sales x 100
• This could be measured by modified for a use by non profit entity and it can change the net assets
were it is to be used in the formula instead of net profits.
• Net Profit percentage after the tax profits to net sales. The remaining profit after all costs of
production , administration and financing have been deducted from thesales , and income taxes
recognized.
• This is the best measures of the overall result of a firm , especially when there is
combined with an evaluation of how well it is using its in working capital.
• This ratio is commonly measured reported on a trend line, to be judge performance over all time.
• And it is also be used to compare the results of a business with their competitors.
• Net Profit is not a indicator of cash flows, and since the net profit incorporates a number of
non-cash expenses such as a accrued expenses, amortization and depreciation.
Table 2
Net Profit Ratio in selected Unit
Bank Name Before Merger After Merger Difference Square Of

(x) (y) (x-y) Difference
(x-y)^2
BOB -5.57 0.87 -6.44 41.4736
PNB -19.44 0.62 -20.06 402.4036
CB 0.74 -4.56 5.3 28.09
UBI -8.54 -8.11 -0.43 0.1849
IB -13.60 -6.98 -6.62 43.8244
total -28.25 515.9765
Net Profit Ratio

-25
-19.44
-20
-15 -13.6
-10 -8.54 -8.11

-6.98
-5.57
-4.56
-5
BOB PNB CB UBI IB
0
0.87 0.62 0.74
5
➢ Analysis
• In the above chart of Net profit Ratio in which Bank Of Baroda has highest ratio (0.87)
after merger and it has lower ratio (-5.57) before the merger.
• Punjab National Bank has highest ratio (0.62) after the merger and it has lower ratio (-
19.44) before the merger.
• Canara Bank has highest ratio (0.74) before the merger and it has lower ratio (-4.56)
after the merger.
• Union Bank Of India has highest ratio (-8.11) after the merger and it has lower ratio (-
• Indian Bank has highest ratio (-6.98) after the merger and it has lower ratio (-13.6)
before the merger.
Table 2.1
Analysis of t-test in selected units under the study of Net profit ratio
N means S.D d.f t-test p-vales Result

X Y XY X Y XY
5 - -3.6320 - 7.69 4.19 9.438 4 -1.338 0.252 Ho
9.2820 5.65000

Their would be no significant difference in mean score of selected units, before and after
merger and acquisition.

and acquisition.
At 5% level of significance , here t= -1.338 and p value = 0.252 So, t<p
3) Return on asset
• Return on assert = Net Income / Total Assets
• The return on assets means that how much contribution of assets is been for generating the
return.
• If more the assets is says to be the good because by the employee than more the assets the
company can be earn more return and also the ratio will be more positive.
• ROA is similar to return on equity but it doesn’t reflect the impact of a banks leverage.
Because the banks are typically leveraged by a factors of 10 to 1, in order to generate a 10%
return on equity, that a banks must earn the equivalent of at least 1% on its assets.
• It has a long been one of the bank industry’s most commonly cited benchmarks.
Return On Assets Ratio in selected Unit

(x-y)^2
BOB -0.33 0.05 -0.38 0.1444

PNB -1.28 0.04 -1.32 1.7424
CB 0.04 -0.30 0.34 0.1156
UBI -0.58 -0.56 -0.02 0.0004
IB -0.88 -0.45 -0.43 0.1849
total -1.81 2.1877
Return On Asset Ratio

-1.4
-1.2 -1.28
-1
-0.8 -0.88
-0.6
-0.4 -0.58 -0.56
-0.45
-0.2 -0.33
BOB PNB CB-0.3 UBI IB
0
0.05 0.04 0.04
0.2
➢ Analysis
• In the above chart of Return On Asset Ratio, in which Bank Of Baroda has highest ratio
(0.05) after the merger and it has lower ratio (-0.33) before the merger.
• Punjab National Bank has highest ratio (0.04) after the merger and it has lower ratio (-
• Canara Bank has highest ratio (0.04) before the merger and it has lower ratio (-0.03)
after the merger.
• Indian Bank has highest ratio (-0.45) after the merger and it has lower ratio (-0.88)
before the merger.
Table 3.1
➢ Analysis of t-test in selected units under the study of Return On Asset Ratio
N means S.D d.f t-test Sig. (2- Result

tailed)
X Y XY X Y XY
-O.6060 -0.2440 -0.36200 0.50585 0.27952 0.61897 4 -1.308 0.261 Ho

and acquisition.
4) Return on Equity
• Return on equity = net income / shareholder’s equity
• Return on equity is the most important metric in all of the bank investing.
• It can be measures profitability by dividing a bank’s net income by its shareholders equity ,
higher the number , greater the return.
• Normally if we want to see a figure in excess of 10% , which is generally to mark the
threshold between long-term value creation and destruction.
Return On Equity Ratio in selected Unit

(x-y)^2
BOB -5.60 0.94 -6.54 42.7716

PNB -24.20 0.58 -24.78 614.0484
CB 1.16 -6.78 7.94 63.0436
UBI -11.92 -10.16 -1.76 3.0976
IB -15.66 -7.88 -7.78 60.5284
total -32.92 783.4896
➢ Analysis
• In the above chart of Return On Equity Ratio , in which Bank Of Baroda has highest ratio
(0.94) after the merger and it has lower ratio (-5.60) before the merger.
• Punjab National Bank has highest ratio (0.58) after the merger and it has lower ratio (-24.20)
before the merger.
• Canara bank has highest ratio (1.16) before the merger and it has lower ratio (-6.78) after
the merger.
• Union Bank Of India has highest ratio (-10.16) after the merger and it has lower ratio (-11.92)
before the merger.
• Indian Bank has highest ratio (-7.88) after the merger and it has lower ratio (-15.66) before
the merger.
Table 4.1
Analysis of t-test in selected units under the study of Return On Equity Ratio
N means S.D d.f t-test p-vales Result

X Y XY X Y XY
5 - -4.66 -6.58 9.66 5.09 11.90 4 -1.237 0.284 Ho
11.24


and acquisition.
5) Cost to Income Ratio
• Cost to Income ratio is the measurement that is been used in the company in the order to
evaluate its efficiency.
• Cost to income is usually used in the microfinance institution or bank in order to measure its
operating cost that compared to the income it generates.
• In order to have a better analysis of a company’s performance in terms of efficiency . and the
microfinance institution or bank that may need to benchmark of the ratio to the historical period
of the industry average.
• The lower cost to income ratio that is better for the company’s performance. Likewise the lower
ratio is the more efficiency of the company that can achieve in the period.
• In order to reduce the cost to income of the company that needs to either increase its operating
income or reduce its operating costs. Operating costs include both personnel expenses and
administration expenses.
• Cost to Income Ratio = Operating costs / Operating Income
Table 5
Cost to Income(%) Ratio in selected Unit
Bank NameBefore Merger(x) After Merger(y) Difference(x-y) Square Of

Difference(x-y)^2
BOB 48.92 43.41 5.51 30.3601

PNB 58.80 41.81 16.99 288.6601
CB 38.78 40.83 -2.05 4.2025
UBI 45.76 46.11 -0.35 0.1225
IB 40.72 41.12 -0..4 0.16
total 20.1 323.5052
➢ Analysis
• In this above chart of Cost To Income in which Bank Of Baroda has highest ratio (48.92) beforethe
merger and it has lower ratio (43.41) after the merger.
• Punjab National Bank has highest ratio (58.80) before the merger and it has lower ratio (41.81)after the
merger.
• Canara Bank has highest ratio (40.83) after the merger and it has lower ratio (38.78) before themerger.
• Union Bank Of India has highest ratio (46.11) after the merger and it has lower ratio (45.76)before
the merger.
• Indian Bank has highest ratio (41.12) after the merger and it has lower ratio (40.72) before the merger.
Table 5.1
Analysis of t-test in selected units under the study of Cost To Income Ratio

X Y XY X Y XY
5 46.59 42.65 3..94 7.91 2.17 7.84 4 1.124 0.324 H1


and acquisition.
At 5% level of significance , here t= 1.124 and p-value = 0.324 So, t>p
As t is less than p value so Null Hypothesis is (Ho) is accepted means there is significant
Cost To Income(%)
70
60
50
40
30
20
10
0
BOB PNB CB UBI IB

6) Earning Per Share
• Earning per share = Net income of the company / weighted average number of shares
outstanding
• Earning per share means it is generally considered to be the single most important variable in
determining a share’s price.
• A company’s profile allocated to each outstanding shares of a common stock. Earing per share
also serve as an indicator of a company’s profitability.
• An important aspect of earning per share that often to ignored is the capital that is required to
be generate the earning (net income) in the calculation.
• The two companies could be generate the same earning per share number, but only one could do
so that it will be less equity (investment) that a company would be more efficient of using its
capital to be generate income and , all other things are being equal , would be a “better”
company.
Table 6
Earning Per Share Ratio in selected Unit
Bank Name
Before Merger(x) After Merger Difference Square Of
(y) (x-y) Difference
(x-y)^2
BOB -64.97 -46.70 -18.27 333.7929

PNB -30.00 1.00 -31 961
CB 8.00 -24.00 32 1024
UBI -25.00 -13.00 -12 144
IB -29.00 -9.00 -20 400
total -49.27 2862.793
Earning Per Share Ratio
-70
-60
-50
-40
-30
-20
-10 BOB PNB CB UBI IB
0
10
20
➢ Analysis
• In the above chart of earning per share ratio , in which Bank Of Baroda has highest ratio (-
46.70) after the merger and it has lower ratio (-64.97) before the merger.
• Punjab national bank has highest ratio (1.00) after the merger and it has lower ratio (- 30.00)
before the merger.
• Canara Bank has highest ratio (8.00) before the merger and it has lower ratio (-24.00) after
the merger.
25.00)before the merger.
• Indian Bank has highest ratio (-9.00) after the merger and it has lower ratio (-29.00) before
the merger.
Table 6.1
Analysis of t-test in selected units under the study of Earning Per Share Ratio

X Y XY X Y XY
- -18.34 -9.85 25.86 18.20 24.37 4 -0.904 0.417 Ho
28.19
➢ Null Hypothesis: (Ho)

➢ Alternate Hypothesis: (H1)

and acquisition.
At 5% level of significance , here t= -0.904 and p-value = 0.417 So, t<p

7) Debt Equity Ratio

• Debt Equity Ratio = total liabilities / total shareholders equity
• Debt equity ratio is measured the company’s financial leverage calculated by dividing the total
liabilities by a stockholders’s equity. By this it indicate that what is proportion of equity and debt
of the company is using to its finance aassets.
• It is also known as the personal debt/equity ratio, and this ratio can be applied to
the personal financial statement and also as well as as corporate ones.
• “Debt” is been involes borrowing money to be repaid, plus interest. “Equity” is been involues
raising money by its selling interests in the company.
• There is a high debt/equity ratio is generally means that a company is been aggressive in the
their financing their growth with debt. And this can be result in volatile earning as a result of
an additional interest expenses.
Table 7
Debt Equity Ratio in selected Unit
Bank Name Before Merger After Merger(y) Difference(x- Square Of

(x) y) Difference
(x-y)^2
BOB 15.07 15.37 -0.3 0.09

PNB 17.36 13.09 4.27 18.23
CB 21.53 20.27 1.26 1.58
UBI 18.92 16.44 2.48 6.15
IB 15.60 14.71 0.89 0.792
total 8.6 26.842
Debt Equity Ratio
25
20
15
10
0
BOB PNB CB UBI IB
➢ Analysis
• In this above chart of Debt equity ratio, in which Bank Of Baroda has highest ratio(15.37) after the
merger and lower ratio (15.07) before the merger.
• Punjab National Bank has highest ratio (17.36) before the merger and lower ratio(13.09) after the
merger.
• Canara Bank has highest ratio (21.53) before the merger and lower ratio (20.27) afterthe merger.
• Union Bank Of India has highest ratio (18.92) before the merger and lower ratio (16.44)after the merger.
• Indian Bank has highest ratio (15.6) before the merger and lower ratio (14.71) after themerger.
Table 8.1
Analysis of t-test in selected units under the study of ROCE Ratio

X Y XY X Y XY
17.69 15.97 1.72 2.62 2.69 1.73 4 2.215 0.091 H1

There would be no significant difference in mean score of selected units, before and aftermerger
and acquisition.

There would be significant difference in mean score of selected units, before and after mergerand
acquisition.
At 5% level of significance , here t= 2.215 and p-value = 0.091So, t>p
As t is less than p value so Null Hypothesis is (Ho) is accepted means there is significant
8) ROCE (%) Ratio
• Return on Capital Employed (ROCE) that is used in finance as a measure of returns that a
company is realizing from its capital employed.
• Capital Employed is the represented as total assets minus current liabilities. In other word
thevalue of the assets that contribute to a company’s ability to generate revenue.
• ROCE is a ratio that indicates the efficiency and the profitability of a company’s capital
investments.
• ROCE = Earning / Capital Employed x100
• The numerator is earning before interest and tax . that the net revenue after all the operating
expenses are deducted.
• The denominator (capital employed) that denotes the sources of the funds such as equity and
short-term debt financing which is used for the day-to-day running of the company.
• It is useful measurement for comparing the relative profitability of the companies.
Table 8
ROCE(%) Ratio in selected Unit
Before Merger After Merger Difference Square Of
Bank Name (x) (y) (x-y) Difference
(x-y)^2
BOB 1.72 1.78 -0.06 0.0036
PNB 1.69 1.81 -0.12 0.0144
CB 1.56 1.32 0.24 0.0576
UBI 1.54 1.70 -0.16 0.0256
IB 1.78 2.14 -0.36 0.1296
Total -0.46 0.2308
ROCE (%)
2.5
1.5
0.5
0
BOB PNB CB UBI IB

➢ Analysis
• In this above chart of ROCE (%) in which Bank Of Baroda has highest ratio (1.78)after
the merger and it has lower ratio (1.72) before the merger.
• Punjab National Bank has highest ratio (1.81) after the merger and it has lower ratio (1.69)
before the merger.
• Canara Bank has highest ratio (1.56) before the merger and it has lower ratio (1.32)after
the merger.
• Union Bank Of India has highest ratio (1.70) after the merger and it has lower ratio (1.54)
before the merger.
• Indian Bank has highest ratio (2.14) after the merger and it has lower ratio (1.78) beforethe
merger.
Table 8.1
Analysis of t-test in selected units under the study of ROCE Ratio

X Y XY X Y XY
1.65 1.75 -0.092 0.104 0.293 0.217 4 -0.948 0.397 Ho

There would be no significant difference in mean score of selected units, before and after

and acquisition.
9. Assets Turnover Ratio
• Asset Turnover Ratio = Sales Revenue / Total Assets.
• Asset turnover ratio means it include the ratio of a firm’s sales to its assets. Its indicates that
how well a firm’s assets are utilized in producing revenue.
• Assets turnover ratio takes into the account both the fixed as well as the current assets to
measure the overall efficiency in generation of the revenue with the assets utilization.
• Higher ratio are the indicative of the efficient management and the utilisation of
the resources while low ratios are indicative of under-utilisation of the resources and presence
of idle capacity.
Asset Turnover Ratio in selected Unit

(x-y)^2
BOB 0.06 0.07 -0.01 0.0001

PNB 0.07 0.07 0 0
CB 0.07 0.07 0 0
UBI 0.07 0.07 0 0
IB 0.07 0.07 0 0
total -0.01 0.0001
Assets Turnover Ratio

0.072
0.07
0.068
0.066
0.064
0.062
0.06
0.058
0.056
0.054
BOB PNB CB UBI IB

➢ Analysis
• In this above chart of assets turnover ratio in which Bank Of Baroda has highest ratio (0.07)
after the merger and it has lower ratio (0.06) before the merger.
• Punjab National Bank is having equal ratio in both before and after the merger.
• Canara Bank is having equal ratio in both before and after the merger.
• Union Bank Of India is having equal ratio in both before and after the merger.
• Indian Bank is having equal ratio in both before and after the merer.
Table 9.1
Analysis of t-test in selected units under the study of Assets Turnover ratio

X Y XY X Y XY
5 0.068 0.070 -0.002 0.004 0.000 0.004 4 -1.000 0.374 Ho
➢


and acquisition.
10. CASA ratio
• CASA ratio means current account and saving account .
• Current Account are those account in which it is specially for customers those who
have tocarry out business and the large number of transactions in the account every day.
• In current account there is no restriction on the number of transactions.
• Savings bank accounts are specially for the individual persons or jointly individual
(joint account) , which has a limit of transaction at every day.
• For example when the cash withdrawn once at a day and 100 times deposition at every
year.
• This account is the bank pay interest for example currency 4% interest rate on saving
account.
• CASA Ratio = Deposits in Current & Saving Account / Total Deposits
CASA Ratio in selected Unit

(x-y)^2
BOB 35.81 35.03 0.78 0.6084

PNB 42.16 42.97 -0.81 0.6561
CB 29.18 31.37 -2.19 4.7961
UBI 35.97 35.46 0.51 0.2601
IB 35.90 36.51 -0.61 0.3721
total -2.32 6.6928
CASA Ratio
50
45
40
35
30
25
20
15
10
5
0
BOB PNB CB UBI IB

➢ Analysis.
• In this above chart in which Bank Of Baroda is having highest ratio (35.81) before the merger
and it has lower ratio (35.03) after the merger.
• Punjab National Bank is having highest ratio (42.97) after the merger and it has lower ratio
(42.16) before the merger.
• Canara Bank is having highest ratio (31.37) after the merger and it has lower ratio (29.18)
before the merger.
• Union Bank Of India has highest ratio (35.97) before the merger and it has lower ratio (35.46)
after the merger.
• Indian Bank has highest ratio (36.51) after the merger and it has lower ratio (35.90) before the
merger.
Table 10.1
Analysis of t-test in selected units under the study of CASA ratio

X Y XY X Y XY
35.80 36.26 -0.464 4.59 4.21 1.184 4 -0.876 0.431 Ho


and acquisition.
FINDINGS
• In operating profit ratio before the merger the highest ratio is (-33.81) in Punjab National Bank
and the lower ratio is (-13.30) in Canara Bank. After the merger the highest ratio is (-23.55) in
Union Bank Of India and the lower ratio is (-11.77) in Bank Of Baroda.
• In net profit ratio before the merger the highest ratio is (0.74) in Canara Bank and the lower
ratio is (-19.44) in Punjab National Bank. After the merger the highest ratio is (0.87) in Bank
Of Baroda and lower ratio is (-8.11) in Union Bank Of India.
• In return on assets before the merger the highest ratio is (0.04) in Canara Bank and lower ratio
is (-1.28) in Punjab National Bank. After the merger the highest ratio is (0.05) in Bank Of
Baroda and lower ratio is (-0.56) in Union Bank Of India.
• In return on equity ratio before the merger the highest ratio id (1.16) in Canara Bank and the
lower ratio is (-24.20) in Punjab National Bank. After the merger the highest ratio is (0.94) in
Bank Of Baroda and the lower ratio is (-10.16) in Union Bank Of India.
• In cost to income ratio before the merger the highest ratio is (58.80) in Punjab National Bank
and the lower ratio is (38.78) in Canara Bank. After the merger the highest ratio is (46.11) in
Union Bank Of India and the lower ratio is (40.83) in Canara Bank.
• In earning per share ratio before the merger the highest ratio is (8.00) in Canara Bank and the
lower ratio is (-64.97) in Bank Of Baroda. After the merger the highest ratio is (1.00) in Punjab
National Bank and the lower ratio is (-46.70) in Bank Of Baroda.
• In debt equity ratio before the merger the highest ratio is (21.53) in Canara Bank and the lower
ratio is (15.07) in Bank Of Baroda. After the merger the highest ratio is (20.27) in Canara Bank
and the lower ratio is (13.09) in Punjab National Bank.
• In ROCE ratio before the merger the highest ratio is (1.78) in Indian Bank and the lower ratio
is (1.54) in Union Bank Of India. After the merger the highest ratio is (2.14) in Indian Bank
and the lower ratio is (1.32) in Canara Bank.
• In asset turnover ratio before the merger the highest ratio is (0.07) in Punjab National Bank,
Canara Bank , Union Bank Of India, and Indian Bank and the lower ratio is (0.06) in Bank Of
Baroda. After the merger the ratio(0.07) are equal in all the merged banks.
• In CASA ratio before the merger the highest ratio is (42.16) in Punjab National Bank and the
lower ratio is (29.18) in Canara Bank. After the merger the highest ratio is (42.97) in Punjab
National Bank and the lower ratio is (31.37) in Canara Bank.
BENEFITS OF MERGERS AND ACQUISITIONS
1. GROWTH 0R DIVERSIFICATION: -
Companies that desire rapid growth in size or market share or diversification in the range of
their products may find that a merger can be used to fulfill the objective instead of going
through the tome consuming process of internal growth or diversification. The firm may
achieve the same objective in a short period of time by merging with an existing firm. In
addition such a strategy is often less costly than the alternative of developing the necessary
production capability and capacity. If a firm that wants to expand operations in existing or
new product area can find a suitable going concern. It may avoid many of risks associated
with a design; manufacture the sale of addition or new products. Moreover when a firm
expands or extends its product line by acquiring another firm, it also removes a potential
competitor.
2. SYNERGISM: -
The nature of synergism is very simple. Synergism exists when ever the value of the
combination is greater than the sum of the values of its parts. In other words, synergism is
“2+2=5”. But identifying synergy on evaluating it may be difficult, infact sometimes its
implementations may be very subtle. As broadly defined to include any incremental value
resulting from business combination, synergism in the basic economic justification of merger.
The incremental value may derive from increase in either operational or financial efficiency.
Operating Synergism: - Operating synergism may result from economies of scale, some
degree of monopoly power or increased managerial efficiency. The value may be achieved by
increasing the sales volume in relation to assts employed increasing profit margins or
decreasing operating risks. Although operating synergy usually is the result of either
vertical/horizontal integration some synergistic also may result from conglomerate growth. In
addition, some times a firm may acquire another to obtain patents, copyrights, technical
proficiency, marketing skills, specific fixes assets, customer relationship or managerial
personnel. Operating synergism occurs when these assets, which are intangible, may be
combined with the existing assets and organization of the acquiring firm to produce an
incremental value. Although that value may be difficult to appraise it may be the primary
motive behind the acquisition.
Financial synergism-Among these are incremental values resulting from complementary
internal funds flows more efficient use of financial leverage, increase external financial
capability and income tax advantages.
a) Complementary internal funds flows

Seasonal or cyclical fluctuations in funds flows sometimes may be reduced or eliminated by
merger. If so, financial synergism results in reduction of working capital requirements of the
combination compared to those of the firms standing alone.
b) More efficient use of Financial Leverage
Financial synergy may result from more efficient use of financial leverage. The acquisition
firm may have little debt and wish to use the high debt of the acquired firm to lever earning
of the combination or the acquiring firm may borrow to finance and acquisition for cash of a
low debt firm thus providing additional leverage to the combination. The financial leverage
advantage must be weighed against the increased financial risk.
c) Increased External Financial Capabilities
Many mergers, particular those of relatively small firms into large ones, occur when the
acquired firm simply cannot finance its operation. Typical of this is the situations are the
small growing firm with expending financial requirements. The firm has exhausted its bank
credit and has virtually no access to long term debt or equity markets. Sometimes the small
firm has encountered operating difficulty, and the bank has served notice that its loan will not
be renewed? In this type of situation a large firms with sufficient cash and credit to finance
the requirements of smaller one probably can obtain a good buy bee. Making a merger
proposal to the small firm. The only alternative the small firm may have is to try to interest 2
or more large firms in proposing merger to introduce, competition into those bidding for
acquisition. The smaller firm‟s situations might not be so bleak. It may not be threatened by
non renewable of maturing loan. But its management may recognize that continued growth to
capitalize on its market will require financing be on its means. Although its bargaining
position will be better, the financial synergy of acquiring firm‟s strong financial capability
may provide the impetus for the merger. Sometimes the acquired firm possesses the financing
capability. The acquisition of a cash rich firm whose operations have matured may provide
additional financing to facilitate growth of the acquiring firm. In some cases, the acquiring
may be able to recover all or parts of the cost of acquiring the cash rich firm when the merger
is consummated and the cash then belongs to it.
d) The Income Tax Advantages
In some cases, income tax consideration may provide the financial synergy motivating a
merger, e.g. assume that a firm A has earnings before taxes of about rupees ten crores per
year and firm B now break even, has a loss carry forward of rupees twenty crores
accumulated from profitable operations of previous years. The merger of A and B will allow
the surviving corporation to utility the loss carries forward, thereby eliminating income taxes
in future periods.
• Counter Synergism-
Certain factors may oppose the synergistic effect contemplating from a merger. Often another
layer of overhead cost and bureaucracy is added. Do the advantages outweigh disadvantages?
Sometimes the acquiring firm agrees to long term employments contracts with managers of
the acquiring firm. Such often are beneficial but they may be the opposite. Personality or
policy conflicts may develop that either hamstring operations or acquire buying out such
contracts to remove personal position of authority. Particularly in conglomerate merger,
management of acquiring firm simply may not have sufficient knowledge of the business to
control the acquired firm adequately. Attempts to maintain control may induce resentment by
personnel of acquired firm. The resulting reduction of the efficiency may eliminate expected
operating synergy or even reduce the post merger profitability of the acquired firm. The list
of possible counter synergism factors could goon endlessly; the point is that the mergers do
not always produce that expected results. Negative factors and the risks related to them also
must be considered in appraising a prospective merger.
• Other motives For Merger
Merger may be motivated by two other factors that should not be classified under synergism.
These are the opportunities for acquiring firm to obtain assets at bargain price and the desire
of shareholders of the acquired firm to increase the liquidity of their holdings.
1. Purchase of Assets at Bargain Prices

Mergers may be explained by opportunity to acquire assets, particularly land mineral rights,
plant and equipment, at lower cost than would be incurred if they were purchased or
constructed at the current market prices. If the market price of many socks have been
considerably below the replacement cost of the assets they represent, expanding firm
considering construction plants, developing mines or buying equipments often have found
that the desired assets could be obtained where by heaper by acquiring a firm that already
owned and operated that asset. Risk could be reduced because the assets were already in
place and an organization of people knew how to operate them and market their products.
Many of the mergers can be financed by cash tender offers to the acquired firm’s
shareholders at price substantially above the current market. Even so, the assets can be
acquired for less than their current casts of construction. The basic factor underlying this
apparently is that inflation in construction costs not fully rejected in stock prices because of
high interest rates and limited optimism by stock investors regarding future economic
conditions.
2. Increased Managerial Skills or Technology

Occasionally a firm will have good potential that is finds it unable to develop fully because of
deficiencies in certain areas of management or an absence of needed product or production
technology. If the firm cannot hire the management or the technology it needs, it might
combine with a compatible firm that has needed managerial, personnel or technical expertise.
Of course, any merger, regardless of specific motive for it, should contribute to the
maximization of owner’s wealth.
3. Acquiring new technology

To stay competitive, companies need to stay on top of technological developments and their
business applications. By buying a smaller company with unique technologies, a large
company can maintain or develop a competitive edge.
BANK MERGER/AMALGAMATION UNDER VARIOUS ACTS
The relevant provisions regarding merger, amalgamation and acquisition of banks

under various acts are discussed in brief as under:
Mergers- banking Regulation act 1949

Amalgamations of banking companies under B R Act fall under categories are voluntary
amalgamation and compulsory amalgamation.
Section 44A Voluntary Amalgamation of Banking Companies.

Section 44A of the Banking Regulation act 1949 provides for the procedure to be followed in
case of voluntary mergers of banking companies. Under these provisions a banking company
may be amalgamated with another banking company by approval of shareholders of each
banking company by resolution passed by majority of two third in value of shareholders of
each of the said companies. The bank to obtain Reserve Bank’s sanction for the approval of
the scheme of amalgamation. However, as per the observations of JPC the role of RBI is
limited. The reserve bank generally encourages amalgamation when it is satisfied that the
scheme is in the interest of depositors of the amalgamating banks.
A careful reading of the provisions of section 44A on banking regulation act 1949 shows that
the high court is not given the powers to grant its approval to the schemes of merger of
banking companies and Reserve bank is given such powers. Further, reserve bank is
empowered to determine the Markey value of shares of minority shareholders who have
voted against the scheme of amalgamation. Since nationalized banks are not Baking
Companies and SBI is governed by a separate statue, the provisions of section 44A on
voluntary amalgamation are not applicable in the case of amalgamation of two public sector
banks or for the merger of a nationalized bank/SBI with a banking company or vice versa.
These mergers have to be attempted in terms of the provisions in the respective statute under
which they are constituted. Moreover, the section does not envisage approval of RBI for the
merger of any other financial entity such as NBFC with a banking company voluntarily.
Therefore a baking company can be amalgamated with another banking company only under
section 44A of the BR act.
Sector 45- Compulsory Amalgamation of banks

Under section 45(4) of the banking regulation act, reserve bank may prepare a scheme of
amalgamation of a banking company with other institution (the transferee bank) under sub-
section (15) of section 45. Banking institution means any banking company and includes SBI
and subsidiary banks or a corresponding new bank. A compulsory amalgamation is a pressed
into action where the financial position of the bank has become week and urgent measures
are required to be taken to safeguard the depositor‟s interest. Section 45 of the Banking
regulation Act, 1949 provides for a bank to be reconstructed or amalgamated compulsorily‟
i.e. without the consent of its members or creditors, with any other banking institutions as
defined in sub section(15) thereof. Action under there provision of this section is taken by
reserve bank in consultation with the central government in the case of banks, which are
weak, unsound or improperly managed. Under the provisions, RBI can apply to the central
government for suspension of business by a banking company and prepare a scheme of
reconstitution or amalgamation in order to safeguard the interests of the depositors. Under
compulsory amalgamation, reserve bank has the power to amalgamate a banking company
with any other banking company, nationalized bank, SBI and subsidiary of SBI. Whereas
under voluntary amalgamation, a banking company can be amalgamated with banking
company can be amalgamated with another banking company only. Meaning thereby, a
banking company can not be merged with a nationalized bank or any other financial entity
Companies Act
Section 394 of the companies act, 1956 is the main section that deals with the reconstruction
and amalgamation of the companies. Under section 44A of the banking Regulation Act, 1949
two banking companies can be amalgamated voluntarily. In case of an amalgamated of any
company such as a non banking finance company with a banking company, the merger would
be covered under the provisions of section 394 of the companies act and such schemes can be
approved by the high courts and such cases do not require specific approval of the RBI.
Under section 396 of the act, central government may amalgamate two or more companies in
public interest.
State Bank of India Act, 1955

Section 35 of the State Bank of India Act, 1955 confers power on SBI to enter into
negotiation for acquiring business including assets and liabilities of any banking institution
with the sanction of the central government and if so directed by the government in
consultation with the RBI. The terms and conditions of acquisition by central board of the
SBI and the concerned banking institution and the reserve bank of India is required to be
submitted to the central government for its sanction. The central government is empowered to
sanction any scheme of acquisition and such schemes of acquisition become effective from
the date specified in order of sanction.
As per sub-section (13) of section 38 of the SBI act, banking institution is defined as under
“banking institution” includes any individual or any association of individuals (whether
incorporated or not or whether a department of government or a separate institution), carrying
on the business of banking. SBI may, therefore, acquire business of any other banking
institution. Any individual or any association of individuals carrying on banking business.
The scope provided for acquisition under the SBI act is very wide which includes any
individual or any association of individuals carrying on banking business. That means the
individual or body of individuals carrying on banking business. That means the individual or
body of individuals carrying on banking business may also include urban cooperative banks
on NBFC. However it may be observed that there is no specific mention of a corresponding
new bank or a banking company in the definition of banking institution under section 38(13)
of the SBI act.
It is not clear whether under the provisions of section 35, SBI can acquire a corresponding
new bank or a RRB or its own subsidiary for that matter. Such a power mat have to be
presumed by interpreting the definition of banking institution in widest possible terms to
include any person doing business of banking. It can also be argued that if State Bank of
India is given a power to acquire the business of any individual doing banking business it
should be permissible to acquire any corporate doing banking business subject to compliance
with law which is applicable to such corporate. But in our view, it is not advisable to rely on
such interpretations in the matter of acquisition of business of banking being conducted by
any company or other corporate. Any such acquisition affects right to property and rights of
many other stakeholders in the organization to be acquired. The powers for acquisition are
therefore required to be very clearly and specifically provided by statue so that any possibility
of challenge to the action of acquisition by any stakeholder are minimized and such
stakeholders are aware of their rights by virtue of clear statutory provisions.
Nationalized banks may be amalgamated with any other nationalized bank or with another
banking institution. i.e. banking company or SBI or a subsidiary. A nationalized bank can not
be amalgamated with NBFC. Under the provisions of section 9 it is permissible for the
central government to merge a corresponding new bank with a banking company or vice
versa. If a corresponding new bank becomes a transferor bank and is merged with a banking
company being the transferee bank, a question arises as to the applicability of the provisions
of the companies act in respect to the merger. The provisions of sec. 9 do not specifically
exclude the applicability of the companies act to any scheme of amalgamation of a company.
Further section 394(4) (b) of the companies act provides that a transferee company does not
include any company other than company within the meaning of companies act. But a
transferor company includes any body corporate whether the company is within the meaning
of companies act or not. The effect of this provision is that provision contained in the
companies act relating to amalgamation and mergers apply in cases where any corporation is
to be merged with a company. Therefore if under section 9(2)(c) of nationalization act a
corresponding new bank is to merged with a banking company( transferee company), it will
be necessary to comply with the provisions of the companies act. It will be necessary that
shareholder of the transferee banking company ¾ the in value present and voting should
approve the scheme of amalgamation. Section 44A of the Banking Regulation Act which
empowers RBI to approve amalgamation of any two banking companies requires approval of
shareholders of each company 2/3rd in value. But since section44A does not apply if a
Banking company is to be merged with a corresponding new bank, approval of 3/4th in value
of shareholders will apply to such merger in compliance with the companies act.
Amalgamation of co-operative banks with Other Entities

Co-operative banks are under the regulation and supervision of reserve bank of India under
the provision of banking regulation act 1949(as applicable to cooperative banks). However
constitution, composition and administration of the cooperative 25 societies are under
supervision of registrar of co-operative societies of respective states (in case of Maharashtra
State, cooperative societies are governed by the positions of Maharashtra co operative
societies act, 1961) Amalgamation of cooperative banks Under section 18A of the
Maharashtra State cooperative societies act 1961(MCS Act ) registrar of cooperatives
societies is empowered to amalgamate two or more cooperative banks in public interest or in
order to secure the proper management of one or more cooperative banks. On amalgamation,
a new entity comes into being. Under sector 110A of the MCS act without the sanction of
requisition of reserve bank of India no scheme of amalgamation or reconstruction of banks is
permitted. Therefore a cooperative bank can be amalgamated with any other entity.
AMALGAMATION OF MULTISTATE COOPERATIVE BANKS WITH
OTHER ENTITIES
Voluntary Amalgamation
Section 17 of multi state cooperative society‟s act 2002 provides for voluntary amalgamation
by the members of two or more multistage cooperative societies and forming a new multi
state cooperative society. It also provides for transfer of its assets and liabilities in whole or in
part to any other multi state cooperative society or any cooperative society being a society
under the state legislature. Voluntary amalgamation of multi state cooperative societies will
come in force when all the members and the creditors give their assent. The resolution has
been approved by the central registrar.
Compulsory Amalgamation
Under section 18 of multi state cooperative societies act 2002 central registrar with the
previous approval of the reserve bank, in writing during the period of moratorium made
under section 45(2) of BR act (AACS) may prepare a scheme for 26 amalgamation of multi
state cooperative bank with other multi state cooperative bank and with a cooperative bank is
permissible.
Amalgamation of Regional Rural Banks with other Entities
Under section 23A of regional rural banks act 1976 central government after consultation
with The National Banks (NABARD) the concerned state government and sponsored banks
in public interest an amalgamate two or ore regional rural banks by notification in official
gazette. Therefore, regional rural banks can be amalgamated with regional rural banks only.
Amalgamation of Financial Institution with other entities
Public financial institution is defined under section 4A of the companies‟ act 1956. Section
4A of the said act specific the public financial institution. Is governed by the provisions of
respective acts of the institution?
Amalgamation of non-Banking financial Companies (NBFC’s) with other entities
NBFCs are basically companies registered under companies‟ act 1956. Therefore, provisions
of companies act in respect of amalgamation of companies are applicable to NBFCs.
Voluntary amalgamation
Section 394 of the companies‟ act 1956 provides for voluntary amalgamation of a company
with any two or more companies with the permission of tribunal. Voluntary amalgamation
under section 44A of banking regulation act is available for merger of two” banking
companies”. In the case of an amalgamation of any other company such as a non banking
finance company with a banking company, the merger would be covered under the provisions
of section 394 of the companies act such cases do not require specific approval .
Compulsory Amalgamation
27 Under section 396 of the companies‟ act 1956, central government in public interest can
amalgamate 2 or more companies. Therefore, NBFCs can be amalgamated with NBFCs only.
CHANGES IN INDIAN BANKING SCENARIO
Like all business entities, banks want to safeguard against risks, as well as exploit available
opportunities indicated by existing and expected trends. M&As in the banking sector have
been on the rise in the recent past, both globally and in India. In this backdrop of emerging
global and Indian trends in the banking sector, this article illuminates the key issues
surrounding M&As in this sector with the focus on India. It seeks to explain the motives
behind some M&As that have occurred in India post-2000, analyse the benefits and costs to
both parties involved and the consequences for the merged entity. A look at the future of the
Indian banking sector, and some key recommendations for banks, follow from this analysis.
The International banking scenario has shown major turmoil in the past few years in terms of
mergers and acquisitions. Deregulation has been the main driver, through three major routes -
dismantling of interest rate controls, removal of barriers between banks and other financial
intermediaries, and lowering of entry barriers. It has lead to disintermediation, investors
demanding higher returns, price competition, reduced margins, falling spreads and
competition across geographies forcing banks to look for new ways to boost revenues.
Consolidation has been a significant strategic tool for this and has become a worldwide
phenomenon, driven by apparent advantages of scale-economies, geographical
diversification, lower costs through 28 branch and staff rationalization, cross-border
expansion and market share concentration. The new Basel II norms have also led banks to
consider M&As.
M&As that have happened post-2000 in India to understand the intent (of the targets and the
acquirers), resulting synergies (both operational and financial), modalities of the deal,
congruence of the process with the vision and goals of the involved banks, and the long term
implications of the merger. The article also analyses emerging future trends and recommends
steps that banks should consider, given the forecasted scenario.
The Indian Banking Sector
The history of Indian banking can be divided into three main phases :
• Phase I (1786- 1969) - Initial phase of banking in India when many small banks were
set up.
• Phase II (1969- 1991) - Nationalization, regularization and growth.
• Phase III (1991 onwards) - Liberalization and its aftermath
With the reforms in Phase III the Indian banking sector, as it stands today, is mature in
supply, product range and reach, with banks having clean, strong and transparent balance
sheets. The major growth drivers are increase in retail credit demand, proliferation of ATMs
and debit-cards, decreasing NPAs due to Securitization, 29 improved macroeconomic
conditions, diversification, interest rate spreads, and regulatory and policy changes (e.g.
amendments to the Banking Regulation Act).
Certain trends like growing competition, product innovation and branding, focus on
strengthening risk management systems, emphasis on technology have emerged in the recent
past. In addition, the impact of the Basel II norms is going to be expensive for Indian banks,
with the need for additional capital requirement and costly database creation and maintenance
processes. Larger banks would have a relative advantage with the incorporation of the norms.
PROCEDURE OF BANK MERGERS AND ACQUISITIONS
• The procedure for merger either voluntary or otherwise is outlined in the respective state
statutes/ the Banking regulation Act. The Registrars, being the authorities vested with the
responsibility of administering the Acts, will be ensuring that the due process prescribed in the
Statutes has been complied with before they seek the approval of the RBI. They would also be
ensuring compliance with the statutory procedures for notifying the amalgamation after
obtaining the sanction of the RBI.
• Before deciding on the merger, the authorized officials of the acquiring bank and the merging
bank sit together and discuss the procedural modalities and financial terms. After the
conclusion of the discussions, a scheme is prepared incorporating therein the all the details of
both the banks and the area terms and conditions. Once the scheme is finalized, it is tabled in
the meeting of Board of directors of respective banks. The board discusses the scheme
threadbare and accords its approval if the proposal is found to be financially viable and
beneficial in long run.
• After the Board approval of the merger proposal, an extra ordinary general meeting of the
shareholders of the respective banks is convened to discuss the proposal and seek their
approval. • After the board approval of the merger proposal, a registered valuer is appointed to
valuate both the banks. The valuer valuates the banks on the basis of its share capital, market
capital, assets and liabilities, its reach and anticipated growth and sends its report to the
respective banks.
• Once the valuation is accepted by the respective banks, they send the proposal along with all
relevant documents such as Board approval, shareholders approval, valuation report etc to
Reserve Bank of India and other regulatory bodies such Security & exchange board of India
(SEBI) for their approval.
• After obtaining approvals from all the concerned institutions, authorized officials of both the
banks sit together and discuss and finalize share allocation proportion by the acquiring bank to
the shareholders of the merging bank (SWAP ratio)
• After completion of the above procedures, a merger and acquisition agreement is signed by
the bank.
RBI Guidelines on Mergers & Acquisitions of Banks
➢ With a view to facilitating consolidation and emergence of strong entities and providing an
avenue for non disruptive exit of weak/unviable entities in the banking sector, it has been
decided to frame guidelines to encourage merger/amalgamation in the sector.
➢ Although the Banking Regulation Act, 1949 (AACS) does not empower Reserve Bank to
formulate a scheme with regard to merger and amalgamation of banks, the State Governments
have incorporated in their respective Acts a provision for obtaining prior sanction in writing,
of RBI for an order, inter alia, for sanctioning a scheme of amalgamation or reconstruction. 31

➢ The request for merger can emanate from banks registered under the same State Act or from
banks registered under the Multi State Co-operative Societies Act (Central Act) for takeover
of a bank/s registered under State Act. While the State Acts specifically provide for merger of
co-operative societies registered under them, the position with regard to take over of a co-
operative bank registered under the State Act by a co-operative bank registered under the
CENTRAL  Although there are no specific provisions in the State Acts or the Central Act for
the merger of a cooperative society under the State Acts with that under the Central Act, it is
felt that, if all concerned including administrators of the concerned Acts are agreeable to order
merger/ amalgamation, RBI may consider proposals on merits leaving the question of
compliance with relevant statutes to the administrators of the Acts. In other words, Reserve
Bank will confine its examination only to financial aspects and to the interests of depositors as
well as the stability of the financial system while considering such proposals.
Information & Documents to be furnished by BY THE ACQUIRER OF
BANKS
1. Draft scheme of amalgamation as approved by the Board of Directors of the acquirer bank.
2. Copies of the reports of the valuers appointed for the determination of realizable value of
assets (net of amount payable to creditors having precedence over depositors) of the acquired
bank.
3. Information which is considered relevant for the consideration of the scheme of merger
including in particular:-
A. Annual reports of each of the Banks for each of the three completed financial years
immediately preceding the proposed date for merger.
B. Financial results, if any, published by each of the Banks for any period subsequent to the
financial statements prepared for the financial year immediately preceding the proposed date
of merger.
C. Pro-forma combined balance sheet of the acquiring bank as it will appear consequent on the
merger.
D. Computation based on such pro-forma balance sheet of the following:-
I. Tier I Capital
II. Tier II Capital
III. Risk-weighted Assets
IV. Gross and Net npas
V. Ratio of Tier I Capital to Risk-weighted Assets
VI. Ratio of Tier II Capital to Risk-weighted Assets
VII. Ratio of Total Capital to Risk-weighted Assets
VIII. Tier I Capital to Total Assets
IX. Gross and Net npas to Advances
X. Cash Reserve Ratio
XI. Statutory Liquidity Ratio
4. Information certified by the values as is considered relevant to understand the net realizable
value of assets of the acquired bank including in particular:-
A. The method of valuation used by the values
B. The information and documents on which the values have relied and the extent of the
verification, if any, made by the values to test the accuracy of such information
C. If the values have relied upon projected information, the names and designations of the
persons who have provided such information and the extent of verification, if any, made by the
values in relation to such information
D. Details of the projected information on which the values have relied
E. Detailed computation of the realizable value of assets of the acquired bank.
4. Such other information and explanations as the Reserve Bank may require.
MOTIVES BEHIND CONSOLIDATION IN BANKING SECTOR
Based on the cases, we can narrow down the motives behind M&As to the following :
Growth - Organic growth takes time and dynamic firms prefer acquisitions to grow quickly in
size and geographical reach.
Synergy - The merged entity, in most cases, has better ability in terms of both revenue
enhancement and cost reduction.
Managerial efficiency - Acquirer can better manage the resources of the target whose value,
in turn, rises after the acquisition.
Strategic motives - Two banks with complementary business interests can strengthen their
positions in the market through merger.
Market entry - Cash rich firms use the acquisition route to buyout an established player in a
new market and then build upon the existing platform.
Tax shields and financial safeguards - Tax concessions act as a catalyst for a strong bank to
acquire distressed banks that have accumulated losses and unclaimed depreciation benefits in
their books.
Regulatory intervention - To protect depositors, and prevent the destabilisation of the
financial services sector, the RBI steps in to force the merger of a distressed bank.
RISKS IN BANK MERGERS AND ACQUISITIONS
1) When two banks merge into one then there is an inevitable increase in the size of the
organization. Big size may not always be better. The size may get too widely and go beyond
the control of the management. The increased size may become a drug rather than an asset.
2) Consolidation does not lead to instant results and there is an incubation period before the
results arrive. Mergers and acquisitions are sometimes followed by losses and tough
intervening periods before the eventual profits pour in. Patience, forbearance and resilience are
required in ample measure to make any merger a success story. All may not be up to the plan,
which explains why there are high rate of failures in mergers.
3) Consolidation mainly comes due to the decision taken at the top. It is a topheavy decision
and willingness of the rank and file of both entities may not be forthcoming. This leads to
problems of industrial relations, deprivation, depression and demotivation among the
employees. Such a work force can never churn out good results. Therefore, personal
management at the highest order with humane touch alone can pave the way.
4) The structure, systems and the procedures followed in two banks may be vastly different,
for example, a PSU bank or an old generation bank and that of a technologically superior
foreign bank. The erstwhile structures, systems and procedures may not be conducive in the
new milieu. A thorough overhauling and systems analysis has to be done to assimilate both the
organizations. This is a time consuming process and requires lot of cautions approaches to
reduce the frictions.
5) There is a problem of valuation associated with all mergers. The shareholder of existing
entities has to be given new shares. Till now a foolproof valuation system for transfer and
compensation is yet to emerge.
6) Further, there is also a problem of brand projection. This becomes more complicated when
existing brands themselves have a good appeal. Question arises whether the earlier brands
should continue to be projected or should they be submerged in favour of a new comprehensive
identity. Goodwill is often towards a brand and its sub-merger is usually not taken kindly.
CHALLENGES AND OPPORTUNITIES IN INDIAN BANKING SECTOR
In a few years from now there would be greater presence of international players in Indian
financial system and some of the Indian banks would become global players in the coming
years. Also competition is not only on foreign turf but also in the domestic field. The new
mantra for Indian banks is to go global in search of new markets, customers and profits. But to
do so the Indian banking industry will have to meet certain challenges. Some of them are –
➢ FOREIGN BANKS – India is experiencing greater presence of foreign banks over time.
As a result number of issues will arise like how will smaller national banks compete in
India with them, and will they themselves need to generate a larger international
presence? Second, overlaps and potential conflicts between home country regulators of
foreign banks and host country regulators: how will these be addressed and resolved in
the years to come? It has been seen in recent years that even relatively strong regulatory
action taken by regulators against such global banks has had negligible market or
reputational impact on them in terms of their stock price or similar metrics. Thus, there
is loss of regulatory effectiveness as a result of the presence of such financial
conglomerates. Hence there is inevitable tension between the benefits that such global
conglomerates bring and some regulatory and market structure and competition issues
that may arise.
➢ GREATER CAPITAL MARKET OPENNESS - An important feature of the Indian

financial reform process has been the calibrated opening of the capital account along
with current account convertibility. It has to be seen that the volatility of capital inflows
does not result in unacceptable disruption in exchange rate determination with
inevitable real sector consequences, and in domestic monetary conditions. The
vulnerability of financial intermediaries can be addressed through prudential
regulations and their supervision; risk management of non-financial entities. This will
require market development,Enhancement of regulatory capacity in these areas, as well
as human resource development in both financial intermediaries and nonfinancial
entities.
➢ TECHNOLOGY IS THE KEY – IT is central to banking. Foreign banks and the new
private sector banks have embraced technology right from their inception and continue
to do so even now. Although public sector banks have crossed the 70%level of
computerization, the direction is to achieve 100%. Networking in banks has also been
receiving focused attention in recent times. Most recently the trend observed in the
banking industry is the sharing of ATMs by banks. This is one area where perhaps India
needs to do 37 significant „catching up‟. It is wise for Indian banks to exploit this
globally state-of-art expertise, domestically available, to their fullest advantage.
➢ CONSOLIDATION – We are slowly but surely moving from a regime of "large

number of small banks" to "small number of large banks." The new era is one of
consolidation around identified core competencies i.e., mergers and acquisitions.
Successful merger of HDFC Bank and Times Bank; Stanchart and ANZ Grindlays;
Centurion Bank and Bank of Punjab have demonstrated this trend. Old private sector
banks, many of which are not able to cushion their NPA‟s, expand their business and
induct technology due to limited capital base should be thinking seriously about
mergers and acquisitions.
➢ PUBLIC SECTOR BANKS - It is the public sector banks that have the large and
widespread reach, and hence have the potential for contributing effectively to achieve
financial inclusion. But it is also they who face the most difficult challenges in human
resource development. They will have to invest very heavily in skill enhancement at all
levels: at the top level for new strategic goal setting; at the middle level for
implementing these goals; and at the cutting edge lower levels for delivering the new
service modes. Given the current age composition of employees in these banks, they
will also face new recruitment challenges in the face of adverse compensation structures
in comparison with the freer private sector.
➢ Basel II – As of 2006, RBI has made it mandatory for Scheduled banks to follow Basel
II norms. Basel II is extremely data intensive and requires good quality data for better
results. Data versioning conflicts and data integrity problems have just one resolution,
namely banks need to streamline their operations and adopt enterprise wide IT
architectures. Banks need to look towards ensuring a risk culture, which penetrates
throughout the organization.
➢ COST MANAGEMENT – Cost containment is a key to sustainability of bank profits

as well as their long-term viability. In India, however, in 2003, operating costs as
proportion of total assets of scheduled commercial banks stood at 2.24%, which is quite
high as compared to in other economies. The tasks ahead are thus clear and within
reach.
➢ RECOVERY MANAGEMENT – This is a key to the stability of the banking sector.

Indian banks have done a remarkable job in containment of non-performing loans
(NPL) considering the overhang issues and overall difficult environment. Recovery
management is also linked to the banks‟ interest margins. Cost and recovery
management supported by enabling legal framework hold the key to future health and
competitiveness of the Indian banks. Improving recovery management in India is an
area requiring expeditious and effective actions in legal, institutional and judicial
processes.
➢ REACH AND INNOVATION - Higher sustained growth is contributing to enhanced

demand for financial savings opportunities. In rural areas in particular, there also
appears to be increasing diversification of productive opportunities. Also industrial
expansion has accelerated; merchandise trade growth is high; and there are vast
demands for infrastructure investment, from the public sector, private sector and
through public private partnerships. Thus, the banking system has to extend itself and
innovate. Banks will have to innovate and look for new delivery mechanisms and
provide better access to the currently under-served. Innovative channels for credit
delivery for serving new rural credit needs will have to be found. The budding
expansion of nonagriculture service enterprises in rural areas will have to be financed.
Greater efforts will need to be made on information technology for record keeping,
service delivery, and reduction in transactions costs, risk assessment and risk
management. Banks will have to invest in new skills through new recruitment and
through intensive training of existing personnel.
➢ RISK MANAGEMENT – Banking in modern economies is all about risk management.

The successful negotiation and implementation of Basel II Accord is likely to lead to
an even sharper focus on the risk measurement and risk management at the institutional
level. Sound risk management practices would be an important pillar for staying ahead
of the competition. Banks can, on their part, formulate „early warning indicators‟ suited
to their own requirements, business profile and risk appetite in order to better monitor
and manage risks.
➢ GOVERNANCE – The quality of corporate governance in the banks becomes critical

as competition intensifies, banks strive to retain their client base, and regulators move
out of controls and micro-regulation. The objective should be to continuously strive for
excellence. Improvement in policyframework, regulatory regime, market perceptions,
and indeed, popular sentiments relating to governance in banks need to be on the top of
the agenda – to serve our society‟s needs and realities while being in harmony with the
global perspective.
HR ISSUES IN MERGERS & ACQUISITIONS

People issues like staffing decision, organizational design, etc., are most sensitive issues in case
of M&A negotiations, but it has been found that these issues are often being overlooked.
➢ Before the new organization is formed, goals are established, efficiencies projected and
opportunities appraised as staff, technology, products, services and know-how are
combined.
➢ But what happens to the employees of the two companies? How will they adjust to the
new corporate environment? Will some choose to leave?
➢ When a merger is announced, company employees become concerned about job
security and rumors start flying creating an atmosphere of confusion, and uncertainty
about change.
➢ Roles, behaviors and attitudes of managers affect employees' adjustment to M&A.
➢ Multiple waves of anxiety and culture clashes are most common causes of merger
failure. 40
➢ HR plays an important role in anticipating and reducing the impact of these cultural
clashes.
➢ Lack of communication leads to suspicion, demoralization, loss of key personnel and
business even before the contract has been signed.
➢ Gaining emotional and intellectual buy-in from the staff is not easy, and so the
employees need to know why merger is happening so that they can work out options
for themselves.
➢ Major stress on the accompany merger activity are: -
* Power status and prestige changes
* Loss of identity
* Uncertainty
➢ Unequal compensation may become issue of contention among new co-workers.
CONCLUSION
• The banking industry has been experiencing major Merger and Acquisition in
the recent years, with the number of global players emerging through
successive Merger and Acquisition in the banking sectors
• The current study indicates that the pre and post merger and acquisition of
the selectedbanks in India have no grater changes in profitability ratio in a
few banks that are satisfactory during the study period. But in future there
are robust projections of improvement in profitability. So the result is to
specify that the mergers led to higher level of cost efficiencies for the
merging banks.
• Merger and acquisition is leads to the financial gain and the increase in price
of target banks . it is depends on the condition and the different situations
that it will be increasethe share and the profit of acquirer or not.
• The primary purpose of the merger and acquisition is to reduce the

competition and protect in existing markets in the economy.
• Mergers are good for the growth and development of the country only when
it does notgive rise to the competition issues.
• Merger and Acquisition impact on the shareholder value. The asset that are
the structural factors such as relative sizes of merging the partners, technique
of the financing Merger and Acquisitions and the number of bidders in
Merger & Acquisitions that have the ability to influence the realization of a
M&As success.
• The importance of considering the size of a potential target, the method to be used
in funding
of M&As. The structural factors acting autonomously the potential of
influence the shareholder value.
• The administration of the banks and the other organizations that intended to
undertake merger and acquisition that should seek to evaluate and that
consider how these structural factors are likely to impact on the achievement
of the intended merger and acquisition.
• Mergers has improve the competition edge of the industry in order to
complete with thecompetitors in the global market but the merger shrink the
industry because of the number of firms reduces.
• Mergers help the banks to be strengthen their financial base and the access
tax benefitsand the direct access to cash resources.
• In banking industry its helps the weaker banks to be strengthen their position
by merging with the bigger and stronger banks
• The above study shows the impact of merger and acquisition on selected
banks like Vijaya Bank , Dena Bank merge with Bank Of Baroda, Oriental
Bank of Commerce and United Bank of India merged into Punjab National
Bank, Syndicate Bank merged with Canara Bank , Andhra Bank and
Corporation Bank merged with Union Bank Of India and Allahabad Bank
merged with Indian Bank
BIBLOGRAPHY
References
• Sanjay Sharma & Sahil Sidana (2017)
• Kotnal Jaya Shree (2016)
• Prof. Ritesh Patel &Dr. Dharmesh Shah (2016)
• Parveen Kumari (2014)
• S. Devarajappa (2012)
• Ramon, A.A.Onaolapo and Ajala, O. Avorinde (2012)
• Azeem Ahmed Khan (2011)
• Nisarg A Joshi and Jay M Desai
• Bhan Akhil
Prasanna Chandra, Financial Management, Theory and Practice (Tata McGRAW Hill) J Fred Weston
and Samuel C. Weaver, Mergers and Acquisitions. EBSCO Research Database
www.banknetindia.com 'Developments in Commercial banking (2004)',
http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=6935 http://www.ibtimes.com/articles
http://www.thehindubusinessline.com www.icici.com www.bankofrajasthan.com
GOOGLE FORM QUESTIONAIRE
1. In which of these banks do you have a bank account?

a. SBI
b. BANK OF BARODA
c. HDFC
d. ICICI
e. Others:________________________(pls specify)
2. What type of account do you hold?

a. Loan Account
b. Savings Account
c. Current Account
d. Credit Card Account
e. Other:_________________________(pls specify)
3. Since how many years are you associated with your bank?
a. 0-1 years
b. 1-3 years
c. 3-5 years
d. 5-10 years
e. 10+ years
4. Are you part of any Loyalty Programmes?

a. YES
b. NO
5. Has the Loyalty Programme helped you stay loyal to your bank?
a. YES
b. NO
6. Are you aware of any deposit schemes your bank provides?

a. YES
b. NO
7. Do you think your bank offers competitive interest rates on your
deposits?
a. YES
b. NO
8. If yes, then for what time period do you like to invest?

a) Less than 6 months
b) 6 months to 1 year
c) 1 year to 3 years
d) 3 years to 5 years
9. Are you assessed to TAX?

a) Yes
b) No
10. What do you feel about the overall service quality of bank?
a) Excellent
b) Very Bad
c) Good
d) Bad
11. Would you recommend this bank to your friends, relatives and associates?
a) Yes
b) No

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ACKNOWLEDGEMENT

I am Zoya Sufiyan Farooqui, a student of Department of Business Management Studies, A. E.

I would like to extend my gratitude to A. E. Kalsekar Degree College and University of

• Equity shares in the transferee company

MERITS AND DEMERITS OF MERGERS

AcquiringBank Acquired Bank Year of a merger

Bank of Vijaya Bank, April 1, 2019

Punjab Oriental Bank of April 1, 2020

Union Bank of Andhra Bank, April 1, 2020

Indian Bank Allahabad Bank April 1, 2020

History of Bank of Baroda, Vijaya Bank and Dena Bank

1.1 Bank of Baroda

1.2 Vijaya Bank

1.3 Dena Bank

AFTER MERGER OF BANK OF BARODA, VIJAYA BANK & DENA BANK

1.1 Punjab National Bank

1.2 Oriental Bank of Commerce

1.3 United Bank of India

AFTER MERGER OF PUNJAB NATIONAL BANK, ORIENTED BANK OF

1.1 Canara Bank

AFTER MERGER OF CANARA BANK & SYNDICATE BANK

1.1 Union Bank of India

1.2 Andhra Bank

AFTER MERGER OF UNION BANK OF INDIA, ANDHRA BANK &

1.1 Indian Bank

AFTER MERGER OF INDIAN BANK & ALLAHABAD BANK

• On 1st April 2020 Allahabad Bank merger into Indian Bank.

Sanjay Sharma & Sahil Sidana(2017)

Kotnal Jaya Shree (2016)

Prof. Ritesh Patel & Dr. Dharmesh Shah(2016)

Ramon, A.A.,Onaolapo and Ajala, O. Ayorinde(2012)

Nisarg A Joshi and Jay M Desai

Bhan Akhil (2009)

1.1 Problem statement

1.2 Research objectives

1.3 Significance of the study

1.4 Sources of data collection

1.5 Selection of sample

Acquiring Bank Acquired Bank Year of a merger

Bank Of Baroda Vijaya Bank, April 1, 2019

1.7 hypothesis of the study Null Hypothesis:

1.8 limitation of the study

BOB -20.82 -11.77 -9.05 81.9025

Operating Profit Ratio

Before Merger After Merger

N Means S.D d.f t-test p-vales Result

• Null Hypothesis: (Ho)

• Alternate Hypothesis: (H1)

At 5% level of significance, here t= -1.064 and p value = 0.347 So, t<p

2) Net Profit Ratio

Bank Name Before Merger After Merger Difference Square Of

Net Profit Ratio

-10 -8.54 -8.11

Before Merger After Merger

N means S.D d.f t-test p-vales Result

• Null Hypothesis: (Ho)

• Alternate Hypothesis: (H1)

At 5% level of significance , here t= -1.338 and p value = 0.252 So, t<p