ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Prashant SaranSubscribe to Prashant Saran

Weak Bank Resolution Framework in India: Thumbs Up or Down?

Do mergers improve performance of the transferee banks in the post-merger period? This paper endeavours to provide empirical evidence to this question based on five case studies: three compulsory mergers and two voluntary mergers of recent origin. An index of stock success and an index of flow success assess the performance impact on the balance sheets and income of these banks. There is evidence that one of the transferee banks associated with a compulsory merger appears to have registered underperformance after the event, though there are incipient signs of turnaround in the recent period. Merger was a performance booster for the other transferee banks. Based on these findings, the paper concludes that the approach adopted by the Reserve Bank of India delivered value to the banking sector.

Resolution of Weak Banks: The Indian Experience

This paper analyses the theoretical framework for bank resolution, general methods of br and relevant crosscountry experience. The primary objective, however, is to estimate the cost of br in India based on three recent compulsory mergers and two voluntary mergers. Evidence suggests that barring one compulsory merger, all other mergers yielded value. Compulsory mergers were found to be costlier than voluntary mergers, though the overall cost of the three compulsory merger cases was, by and large, neutral.
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