Banking mergers in India

Abstract

This research proposal mainly covers issues in consolidation of Indian banking, due to problems associated with valuation in banking mergers in India. The research proposal represents hypothesis, and raised research questions, that whether mergers in Indian banking are producing good results or not. The paper also represents about two types of mergers in Indian banking, and how and why these mergers face problems.

Table of Contents

Introduction4

Discussion4

Issues related merger in Indian Banking5

Research questions6

Hypothesis6

Voluntary mergers7

Shareholder's perceptions7

Analysis of Results8

References8

Banking mergers in India

Introduction

Today, Mergers and acquisitions are essential parts of each industry, especially financial industry over last fifteen years. It has been researched, that more than ten thousands firms went for acquisitions and merger in each industrialized country from a period of 1990 to 2001. The figure of these industries was counted to be 15,500 around the globe (M.Jayadev and Rudrasensarma, 2007). The merger and acquisitions in financial industry is due to the competition in today's world. Today, era is of technology and, rapid advancement of technology is observed in each industry. Organizations are adopting different methods to face technological advancements by doing merger and acquisitions. One of the advantages of these mergers is that, organization may produce better outcomes, with the help of skilled employees. Shareholders and stakeholders may enhance their wealth through these acquisitions and mergers. These mergers have brought numerous benefits to the banking organizations of United States, Europe and United Kingdom (Berger and Humphrey, 1994). Indian banking sector is lacking opportunities and values of merger in different states.

Discussion

It is researched and noticed worldwide that, mergers are usually done according to the market and customer requirements but, in India it is not the case, as most of the mergers are forced mergers. These forced mergers are brought by regulatory authorities such as Reserve Bank of India (RBI) (Reserve Bank of India, 2001). That is why it has unique story and, not the case of other mergers in banking in different countries. Malaysia and other emerging market have already focused forced mergers. The evidences of these studies are enough to show numerous valuations in mergers in banking of India.

The main aim of this paper is to discuss merger trends in India, and problems associated with valuation of merger in banking in all over India.

Indian Banking systems and Merger Trends

The banking system of India consists of state owned banks which are also known as public sector banks, there are also private banks and, branches of foreign banks which are operating in India. The period of 1947 to 1967 was very liberal in India and, showed finite controls on credit and interest rates. When there was a criticism between these periods, then this was due to limited resources and poor allocations to most parts of India. As a result of this, India took major steps in between 1967 to 1980s, having control on credit allocations, interest rates and improvements in primary and secondary reserve ratios.

Government of India at that time, showed good control on allocation credits on all ...