AN ANALYTICAL STUDY OF MERGERS AND ACQUISITION

IN INDIAN BANKING SECTOR

SITUATION ANALYSIS AND PROBLEM DEFINITION

Mergers and acquisitions in banking sector have become familiar in the majority of all the
countries in the world. A large number of international and domestic banks all over the world
are engaged in merger and acquisition activities. One of the principal objectives behind the
mergers and acquisitions in the banking sector is to reap the benefits of economies of scale.
The project aims to understand the behaviour of various Mergers and Acquisitions in Indian
Banking Sector. A large number of international and domestic banks all over the world are
engaged in merger and acquisition activities. One of the principal objectives behind the
mergers and acquisitions in the banking sector is to reap the benefits of economies of scale.
In the recent times, there have been numerous reports in the media on the Indian Banking
Industry RepoIn many countries, global or multinational banks are extending their operations
through mergers and acquisitions with the regional banks in those countries. These mergers
and acquisitions are named as cross-border mergers and acquisitions in the banking sector or
international mergers and acquisitions in the banking sector. By doing this, global banking
corporations are able to place themselves into a dominant position in the banking sector,
achieve economies of scale, as well as garner market share.

Mergers and acquisitions in the banking sector have the capacity to ensure efficiency,
profitability and synergy. They also help to form and grow shareholder value.
In some cases, financially distressed banks are also subject to takeovers or mergers in the
banking sector and this kind of merger may result in monopoly and job cuts.
Deregulation in the financial market, market liberalization, economic reforms, and a number
of other factors have played an important function behind the growth of mergers and
acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be
overcome through appropriate measures.
Mergers and acquisitions in banking sector are controlled or regulated by the apex financial
authority of a particular country. For example, the mergers and acquisitions in the banking
sector of India are overseen by the Reserve Bank of India (RBI).
rts have been on a variety of topics. The topics have been ranging from issues such as user
friendliness of Indian banks, preparedness of banks to meet the fast approaching Basel II
deadline, increasing foray of Indian banks in the overseas markets targeting inorganic growth.
Mergers and Acquisitions is the only way for gaining competitive advantage domestically
and internationally and as such the whole range of industries are looking to strategic
acquisitions within India and abroad. In order to attain the economies of scale and also to

combat the unhealthy competition within the sector besides emerging as a competitive force
to reckon with in the International economy. Consolidation of Indian banking sector through
mergers and acquisitions on commercial considerations and business strategies is the
essential pre-requisite. Today, the banking industry is counted among the rapidly growing
industries in India. It has transformed itself from a sluggish business entity to a dynamic
industry. The growth rate in this sector is remarkable and therefore, it has become the most
preferred banking destinations for international investors. In the last two decade, there have
been paradigm shift in Indian banking industries. The Indian banking sector is growing at an
astonishing pace. A relatively new dimension in the Indian banking industry is accelerated
through mergers and acquisitions. It will enable banks to achieve world class status and throw
greater value to the stakeholders.

In many countries, global or multinational banks are extending their operations through
mergers and acquisitions with the regional banks in those countries. These mergers and
acquisitions are named as cross-border mergers and acquisitions in the banking sector or
international mergers and acquisitions in the banking sector. By doing this, global banking
corporations are able to place themselves into a dominant position in the banking sector,
achieve economies of scale, as well as garner market share.
Mergers and acquisitions in the banking sector have the capacity to ensure efficiency,
profitability and synergy. They also help to form and grow shareholder value.
In some cases, financially distressed banks are also subject to takeovers or mergers in the
banking sector and this kind of merger may result in monopoly and job cuts.
Deregulation in the financial market, market liberalization, economic reforms, and a number
of other factors have played an important function behind the growth of mergers and
acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be
overcome through appropriate measures.
Mergers and acquisitions in banking sector are controlled or regulated by the apex financial
authority of a particular country. For example, the mergers and acquisitions in the banking
sector of India are overseen by the Reserve Bank of India (RBI).

Profitable growth constitutes one of the prime objectives of the business firms. This can be
achieved internally either through the process of introducing/developing new products or by
expanding/enlarging the capacity of existing product (s). Alternatively, growth process can be
facilitated externally by acquisition of existing firms. This acquisition may be in the form of
mergers, acquisitions, amalgamations, takeovers, absorption, consolidation, and so on. The
internal growth is also termed as organic growth while external growth is called inorganic
growt There are strengths and weaknesses of both the growth processes. Internal expansion
apart from enabling the firm to retain control with itself also provides flexibility in terms of

choosing equipment, mode of technology, location, and the like which are compatible witits
exaction operations. However internal expansion usually involves a longer implementations
period and also entails greater uncertainties particularly associated with development of new
products. Above all there might be sometimes problem of raising adequate finances required
for the implementation of various capital budgeting projects involving expansion.
Acquisitions and mergers obviates, in most of the situations, financing problems as
substantial/full payments are normally made in the form of the shares of the acquiring
company. Further it also expedites the pace of growth as acquired firm already has the
facilities or products and therefore saves time otherwise requires in building up new facilities
from scratch as in the case of internal expansion.

Shristy Singh
Roll no. 93
MMS Finance
Mentor: Prof. Gaurav Rathod