FINANCIAL DISRUPTION-BANKING MERGER IN INDIA-WHAT, HOW, WHEN AND WHY-PART 2
We discussed about the benefits and losses that are about to happen due to the mega merger which is going to take place in the banking sector in India, so let’s analyze and discuss further on the topic.
History of Mergers in Indian Banking
Mergers of banks began in India in the 1960s in order to bail out the weaker banks and protect the customer interests, after that in post liberalization period the quest to create an Indian bank that would be in the league of global giants had been continuing since 1990. Moving on the path of creating one of the largest global banks, the government had approved the merger of five associate banks with SBI in February 2017. Later in March, the Cabinet approved merger of BMB also.
Mergers of banks began in India in the 1960s in order to bail out the weaker banks and protect the customer interests, after that in post liberalization period the quest to create an Indian bank that would be in the league of global giants had been continuing since 1990. Moving on the path of creating one of the largest global banks, the government had approved the merger of five associate banks with SBI in February 2017. Later in March, the Cabinet approved merger of BMB also.
Consolidation of Banks (2015-2017)
This phase saw five associates of SBI and Bhartiya Mahila Bank getting merged in SBI. The vision was to have strong banks rather than having large number of banks. This resulted in SBI being one amongst the 50 largest banks in the world. Union Cabinet decided to merge all the remaining five associate banks of State Bank Group with State Bank of India in 2017. After the Parliament passed the merger Bill, the subsidiary banks ceased to exist and the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956 were repealed.
Five associates and the Bhartiya Mahila Bank became the part of State Bank of India (SBI) beginning April 1, 2017. This has placed State Bank of India among the top 50 banks in the world. The five associate banks that were merged into State Bank of India were- State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT). The other two Associate Banks namely State Bank of Indore and State Bank of Saurashtra had already been merged with State Bank of India. After the merger, the total customer base of SBI increased to 37 crore with a branch network of around 24,000 and around 60,000 ATMs across the country.
Merger of Banks 2018
The government had merged Dena Bank and Vijaya Bank with Bank of Baroda, creating the third-largest bank by loans in the country in 2018, year 2018 had seen the only 1 major bank mergers.
Mega Merger of Banks 2019
With the mega merger announces on August 30, 2019, ten public sectors banks will be reduced into four large banks. The four sets of banks are to be created out of Canara Bank and Syndicate Bank merger; Indian Bank and Allahabad Bank merger; Union Bank of India, Andhra Bank and Corporation Bank merger; and the bank to be created after merger of Punjab National Bank, Oriental Bank of Commerce and United Bank of India.
Mergers have a very consolidated, refined and drawn out effect on the nation’s economy. It is but the desire for growth that acts as the fuel not only for an entrepreneur but also for every professional or corporation. This deep desire for growth in terms of customer base, balance sheet and profit has led the organizations engaging in mergers and acquisitions to move ahead and onwards in synergy. The Indian Banks too did not stay aloof from this wave of mergers and acquisitions (M&A). Initially banks were merged to save non-performing banks or non efficient banks but as time evolved the system too evolved. In the recent times mergers and acquisitions have also been made on grounds of business growth, profitability and organizational restructure.
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