Effectiveness of Banks after M & A

Abstract

The goal of a bank merger is to increase the bank ’ s value in one way or another. The days of liberalization and globalization are in and there is a spate of mergers and acquisition which is sweeping the corporate world. Consolidation in the banking sector should largely be synergy-driven to acquire a quantum jump in the performance of the combined entity (2 + 2 ≥ 5). It can be achieved by combining complementary strengths, giving a better geographical spread, serving a larger number of customers in a better way with more diversified products and skills, realizing the opportunities for cross-selling, containing the cost of the merged entity, reduced competition, better utilization of available resources and deriving economies of scale. Over the last one and a half decade, the banking sector in India has not only grown in terms of size but also matured, diversified and consolidated to contribute towards building a robust financial system. In this paper , five cases of bank merger have been taken and Null Hypothesis , i.e. there is no difference in mean value of selected variables before merger and after the merger , is set and found rejected (in most of the variables). On the basis of the overall analysis , merger of Bank of Karad Ltd. (BOK) with Bank of India (BOI) was more effective in most of the variables as compared to merger of the New Bank of India (NBI) with Punjab National Bank (PNB), Benaras State Bank Ltd. (BSB) with Bank of Baroda (BOB), Nedungadi Bank Ltd. (NBL) with Punjab National Bank (PNB) and Global Trust Bank Ltd. (GTB) with Oriental Bank of Commerce (OBC).