Merger And Acquisition In Banking Industry

The Banking industry became one of the fastest growing sectors after the first phase economic reforms of 1991. The Banking sector has played a vital role in the overall economic development of the country right from the time of nationalization. Due to globalization the Indian Public Sector banks have been facing keen competition from the Private Sector and Foreign banks as well. As is well known, survival of the fittest is the core theme in the global market today. Sustenance and growth of public sector banking is very much essential for balanced and effective economic development. Increased competition has made this a challenging task. It is imperative that there is urgent need to strengthen the weak public sector banks. To strengthen the

It has also succeeded in the case of private and foreign banking. The UPA government headed by Dr. Manmohan Singh had adopted the National Common Minimum Programme and Globalization with a humanistic approach as suggested by the left parties. Therefore, instead of privatizing the public sector banks including regional rural banks the economic policy lays emphasis on the merger and acquisition of public sector banks. This is done mainly to instill confidence in the minds of the general public and to facilitate and effectively transform the functioning public sector banking system in the globalized

It dates back to the beginning of banking in India. In 1921 the Bank of Bengal, the Bank of Bombay and the Bank of Madras were merged to form the Imperial Bank of India, which subsequently was converted as the State Bank of India in 1955 when the Government took over control of its operations. Today, Mergers and Acquisitions is a term which is hardly used in the banking industry as business deals, but perceived as a strong strategy which can be trusted upon for long run survival and sustenance. It is always taken in a negative sense instead of considering it as a business potential. In the past, whenever the Government felt that a commercial bank had become weak, either financially or managerially, a decision was taken to merge it with some strong bank. Some examples of such mergers include Hindustan Commercial Bank and New Bank of India with Punjab National Bank and Laksmi Commercial Bank with Canara Bank, Nedangu banks with Punjab National Bank, Bank of Muscut with Centurion bank, GTB with Oriental bank of commerce and the proposal of the associate banks with SBI. These steps are an attempt to consolidate and strengthen the financial position and to increase the market share of Indian