Page 27 - Banking Finance October 2022

ARTICLE

in its projections about the target bank , then an overly Not confined to one particular banking group but
optimistic forecast leads to a critical issue and M&A across groups
activity fails
Since banks display analogous characteristics of
performance scope of consolidation increases
Challenges and opportunities Involved

in the Bank Mergers in Indian banking Future Scenario
sector The upcoming outlook of the Indian banking sector has a
lot of action plans set to be seen with respect to M & A as
From now there would be larger presence of Global players
a key to competitiveness being the driving force. Some of
in Indian financial system and some of the Indian banks
the PSU banks are indeed planning to combine with their
would become global players in the coming years. The new
peers to consolidate their capacities. In the coming times
mantra for Indian banks is to go globally in search of
there is also a chance of strong cooperative banks merging
markets, clients and gains. There are numerous challenges
with each other and weak cooperative banks merging with
involved in the process of M& A of banks. Some of the most
stronger ones.
common challenges that arise during M&A in the Indian
banking Industry by examining the preceding bank mergers
While there would be numerous benefits of M&A like size
in the context of India are
and thereby scale of economies, considerable geographical
Competition - Suitable to face more competitive
penetration, enhanced brand name, increased negotiating
pressures and establish a strong institution, which will
power, and many more.; there are also likely to be threats
revise banking in the tremendous competitive age of
involved in M&A like problems associated with size, variance
globalization and liberalization
in structure, systems and the procedures of the two
Tech Edge - ATM, Phone and internet banking will save
companies, problem of valuation etc which would need to
the cost
be solved before such M&A activity can give enhanced value
Regulatory Ambiguity: M& A laws and regulations are to different sectors
still developing and trying to catch up with the global
M&A
Conclusion:
Legal Developments: There have been constantly new Before allowing mergers to proceed, it must be ensured
legal developments in the Competition Act, 2002, SEBI that certain conditions must be satisfied so that merger
Takeover Regulations in 2011 and also the proves too beneficial for all the concerned. The merger
announcement of limited sections of the new process should insure that the merged entities should be
Companies Act, 2013, has led to issues in India relating adequately capitalized to meet these requirements. In a
to their interpretations and effect on the deals fast-growing sector like banking, Mergers is a, which, if used
valuations and process. strategically after considering all the implications, will propel
growth and prosperity not only in the domestic economy but
Considerations towards M&A also the global economy at large.
Should have a fairly large number of banks to match up
with international banking standards Mergers should be designed in such a manner that the
operational efficiency and financial performance improves.
Value maximizations & performance magnification
As presented above, these bank mergers can also cause
Government should give high attention to the M&A some severe problems in implementation. To be able to
process completely reap the benefits of the mergers, all the
Streamline HR functions stakeholders like the customers, employees, management
should be satisfied. Other aspects like technology should be
Study previous experiences before merger
carefully considered before such mergers.
Empirical study on M&A between big and small banks
to greater gains
References
Capital Adequacy & NPA position improves Various Sources

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