ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
Reader Mode
-A A +A

Mergers and Acquisitions of Banks in Post-Reform India

T R Bishnoi (trbishnoi@yahoo.com) is Reserve Bank of India Chair Professor, Faculty of Commerce, The MS University of Baroda, Vadodara. Sofia Devi (sofeedevi@gmail.com) teaches economics at The MS University of Baroda, Vadodara.

A major perspective of the Reserve Bank of India's banking policy is to encourage competition, consolidate and restructure the system for financial stability. Mergers and acquisitions have emerged as one of the common methods of consolidation, restructuring and strengthening of banks. There are several theoretical justifications to analyse the M&A activities, like change in management, change in control, substantial acquisition, consolidation of the firms, merger or buyout of subsidiaries for size and efficiency, etc. The objective here is to examine the performance of banks after mergers. The hypothesis that there is no significant improvement after mergers is accepted in majority of cases--there are a few exceptions though. Therefore, the strategy of M&A to consolidate banks for purposes of efficiency seems flawed. Future banking policy must take note of this empirical reality and long-drawn experience of the past two decades.

Our grateful thanks to the referee for expert comments and suggestions for improvements in the paper.

Comments

(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top