MERGERS & ACQUISITIONS OF SBI ASSOCIATE BANKS

Submitted in partial fulfillment f t!e re"uirement# f r $ #t Graduate %ipl ma In Mana&ement '$G%M( 2012-2014

SUBMITTE% B)

RAS*I AS*AR $G%M $G+,-+.., Bat/!0 -.,-+-.,1

IES Mana&ement C lle&e and Re#ear/! Centre2 Bandra2 Mumbai

IES Mana&ement C lle&e and Re#ear/! Centre Bandra2 Mumbai

MA) 3 4UNE -.,5

Student6# %e/larati n

I !ereb7 de/lare t!at t!i# rep rt2 #ubmitted in partial fulfillment f t!e re"uirement f r t!e a8ard f r t!e $G%M2 t IES Mana&ement C lle&e and Re#ear/! Centre i# m7 ri&inal 8 r9 and n t u#ed an78!ere f r a8ard f an7 de&ree r dipl ma r fell 8#!ip r f r #imilar title# r pri:e#;

I furt!er /ertif7 t!at 8it! ut an7 b<e/ti n r / nditi n #ub<e/t t t!e permi##i n f t!e / mpan7 8!ere I did m7 #ummer pr <e/t2 I &rant t!e ri&!t# t IES Mana&ement C lle&e and Re#ear/! Centre t publi#! an7 part f t!e pr <e/t if t!e7 deem fit in < urnal#=Ma&a:ine# and ne8#paper# et/ 8it! ut m7 permi##i n; Pla/e 0 Mumbai

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++++++++++++++++++++++++++++++
Si&nature

Name Cla##

0 RAS*I AS*AR 0 $G%M 'SEM 1(

R ll N ; 0 $G+,-+.., Certifi/ate fr m t!e Fa/ult7 Guide

T!i# i# t /ertif7 t!at t!e di##ertati n #ubmitted in partial fulfillment f r t!e a8ard f $ #t Graduate %ipl ma in Mana&ement '$G%M( f IES Mana&ement C lle&e and Re#ear/! Centre i# a re#ult f t!e b nafide re#ear/! 8 r9 /arried ut b7 M#; Ra#!i A#!ar under m7 #uper>i#i n and &uidan/e; N part f t!i# rep rt !a# been #ubmitted f r a8ard f an7 t!er de&ree2 dipl ma2 fell 8#!ip r t!er #imilar title# r pri:e#; T!e 8 r9 !a# al# n t been publi#!ed in an7 < urnal#=Ma&a:ine#;

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Faculty guide Si&nature f t!e Fa/ult7 Guide0 ??????????????

Name f Fa/ult7 Guide0 ???????????????????? $la/e0 IES Mana&ement C lle&e and Re#ear/! Centre

ACKNOWLEDGEMENT

It i# a matter f &reat plea#ure f r me t #ubmit t!e pr <e/t rep rt titled @Mer&er# and A/"ui#iti n# f SBI A## /iate Ban9# t 8ard# t!e partial fulfilment f t!e re"uirement f r m7 $G%M / ur#e at Indian Edu/ati n S /iet7 Mana&ement & Re# ur/e Centre. I 8e a deep &ratitude t all t! #e 8! !a>e !elped me in preparin& t!i# rep rt; A rd# #eem t be inade"uate t eBpre## m7 #in/ere t!an9# t %r;Saum7a Kanti G! #!2 CEA & GM E/ n mi/ Re#ear/! %epartment f r !i# >aluable &uidan/e2 / n#tru/ti>e /riti/i#m2 and en/ ura&ement durin& t!e entire / ur#e f t!e #tud7; I 8 uld al# li9e t t!an9 Mr; Ul!a# Aa9!ade2 AGMC Mr; Sa9et *i#!i9ar2 Man&er &a>e me an

'E/ n mi#t( and Mr; Tapa# $arida2 %eput7 Mana&er 'E/ n mi#t( 8! /an !elp u# n t nl7 t #ur>i>e but #urm unt ur# diffi/ultie#;

pp rtunit7 t learn t!e re/urrin& a/9n 8led&ement f 8!at i# 8 r9in& in ur li>e# t!at

I am !i&!l7 bli&ed t all t! #e 8! !elped me t pr /ure data e#pe/iall7 t!e Mer&er %epartment f r t!i# pr <e/t; I eBpre## m7 #in/ere t!an9# t State Ban9 f India2 C rp rate Centre2 Nariman $ int2 Mumbai( f r&i>in& me all t!e fa/ilitie# durin& m7 pr <e/t and !elpin& & &uidin& me durin& m7 intern#!ip peri d; I 8 uld e>en li9e t t!an9 m7 $r <e/t Ment r at / lle&e $r f; Ga:i7a Sa7ed f r !elpin& me t d t!e #ame;

Ra#!i A#!ar

TABLE OF CONTENTS
TABDE OF CONTENTS;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;E ,; EFCECUTIGE SUMMAR);;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;H ,;, INTRO%UCTION TO BANKING SECTOR;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;I 1.3 INTRODUCTION TO MERGERS & ACQUSITIONS...................................................18 *ISTOR) OF MERGERS IN IN%IAN BANKING IN%USTR);;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;-1 -;, OB4ECTIGES OF STU%);;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;-H -;- MET*O%ODOG) ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;-I -;5 DIMITATIONS OF T*E STU%);;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;-J 5; ANAD)SIS OF $AST MERGERS OF ASSOCIATE BANK;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;5. 5;, ANAD)SIS OF $AST MERGERS OF SBI;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;55 5;- GADUATION OF ASSOCIATE BANKS;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;5H 1; CONCDUSION AN% RECOMMEN%ATIONS;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;1K BIBDOGRA$*);;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;1H

LIST OF CHARTS
FIGURE ,0 *IERARC*) OF BANKS IN IN%IA;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;,, FIGURE -0 GADUATION MET*O%S;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;5H FIGURE 50 COM$ARISON OF ASSOCIATE BANKS BASE% ON T*EIR GADUE;;;;;;;;;;;;;;;;;1K

LIST OF TABLES
TABDE ,0 GADUE OF FIRM IN 'RS; CRORE(;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;H TABDE - 0 $ERFORMANCE *IG*DIG*TS OF ASSOCIATE BANKS;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;,1 TABDE 50 CA$ITAD AN% S*ARE*OD%ING $ATTERN AT SBI;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;,E TABDE 10 TABDE OF $AST MERGERS IN IN%IAN BANKING SECTOR;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;-E TABDE E0 $ROFITABIDIT) RATIOS TREN% OF STATE BANK OF IN%IA;;;;;;;;;;;;;;;;;;;;;;;;;;;55 TABDE K0 CRAR TREN% OF STATE BANK OF IN%IA;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;51 TABDE H0DIQUIT%IT) RATIOS OF STATE BANK OF IN%IA;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;5E TABDE I0 GROAT* IN%ICATORS OF STATE BANK OF IN%IA;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;5K

1. E CEC!TI"E S!MMAR#
Mer&er i# a / mbinati n f t8 r m re / mpanie# int ne / mpan7; T!e a/"uirin& / mpan7 a/"uire# t!e a##et# and t!e liabilitie# eB/!an&e f r t!eir #!are# in t!e tar&et / mpan7; T!e primar7 b<e/ti>e#'#( f t!i# pr <e/t i# t #tud7 and pa#t mer&er# f State Ban9 f India 'SBI( 8it! it# a## /iate# u#in& t!e pre and p #t e>ent anal7#i# u#in& >ari u# finan/ial rati #; T!e #tud7 i# d ne 8it! an e7e n future t a#/ertain 8!i/! f t!e eBi#tin& A## /iate Ban9# f SBI 8 uld / ntribute 8!at t >aluati n f SBI if mer&er# are / ntemplated t da7; In t!i# #tud7 >aluati n f all t!e A## /iate Ban9# i# d ne u#in& Capital A##et $ri/in& M del 'CA$M( au&mented 8it! %i#/ unted Ca#! Fl 8# Te/!ni"ue # a# t arri>e at t!e terminal >alue f ea/! A## /iate Ban9; T!e re#ult# t!i# eBer/i#e are #ummari:ed in Table , Ta$le %& "alue '( Fi)* i+ ,R-. C)')e.
Na*e '( A--'ciate Ba+/ State Ban9 f Bi9aner & 4aipur State Ban9 f Tra>an/ re State Ban9 f M7# re State ban9 f $atiala State f *7derabad "alue '( A--'ciate Ba+/ 5EJ.;.. 5,--;.. IEI;.E ,-5;5. K11;1.

f t!e tar&et / mpan7; T7pi/all72

#!are! lder# f t!e amal&amatin& / mpan7 &et #!are# f t!e amal&amated / mpan7 in

T!e ma< r findin&# f >aluati n are t!at f all t!e A## /iate# Ban9#2 t!e !i&!e#t >alue i# e#timated f r State Ban9 f Bi9aner & 4aipur f ll 8ed b7 State Ban9 f Tra>an/ re; In term# f #e"uen/in& t!e mer&er# f A## /iate Ban92 it 8ill be ad>i#able t mer&e State Ban9 f Bi9aner & 4aipur f ll 8ed b7 State Ban9 f Tra>an/ re f r maBimi:in& t!e >alue f SBI ! ldin& / mpan7;

%.% INTROD!CTION TO BANKING SECTOR

Indian ban9in& i# t!e lifeline

f t!e nati n and it# pe ple; Ban9in& !a# !elped in

de>el pin& t!e >ital #e/t r# f t!e e/ n m7 and u#!er in a ne8 da8n f pr &re## n t!e Indian ! ri: n; T!e #e/t r !a# tran#lated t!e ! pe# and a#pirati n# f milli n# f pe ple int realit7; But t d # 2 it !a# !ad t / ntr l mile# and mile# f diffi/ult terrain2 #uffer t!e indi&nitie# f f rei&n rule and t!e pan&# f partiti n; T da72 Indian ban9# /an / nfidentl7 / mpete 8it! m dern ban9# f t!e 8 rld; Bef re t!e -.t!/entur72 u#ur72 r lendin& m ne7 at a !i&! rate f intere#t2 8a# 8idel7 pre>alent in rural India; Entr7 f 4 int #t /9 ban9# and de>el pment f C perati>e m >ement !a>e ta9en >er a & d deal f bu#ine## fr m t!e !and# f t!e Indian m ne7 lender2 8! alt! u&! #till eBi#t2 !a>e l #t !i# mena/in& teet!; In t!e Indian Ban9in& S7#tem2 C a&ri/ultural and a&ri/ulture+ba#ed perati>e ban9# eBi#t #ide b7 #ide 8it! / mmer/ial perati n# in/ludin& farmin&2 /attle2 mil92 !at/!er72 ban9# and pla7 a #upplementar7 r le in pr >idin& need+ba#ed finan/e2 e#pe/iall7 f r per# nal finan/e et/; al n& 8it! # me #mall indu#trie# and #elf+empl 7ment dri>en a/ti>itie#; Generall72 / + perati>e ban9# are & >erned b7 t!e re#pe/ti>e / + perati>e a/t# f #tate & >ernment#; But2 #in/e ban9# be&an t be re&ulated b7 t!e RBI after , #t Mar/! ,JKK2 t!e#e ban9# are al# Re&ulati n A/t ,J1J; T!e Re#er>e Ban9 i# re#p n#ible f r li/en#in& f ban9# and bran/!e#2 and it al# re&ulate# /redit limit# t #tate / + perati>e ban9# n be!alf f primar7 / + perati>e ban9# f r finan/in& SSI unit#; India /ann t !a>e a !ealt!7 e/ n m7 8it! ut a # und and effe/ti>e ban9in& #7#tem; T!e ban9in& #7#tem #! uld be !a##le free and able t meet t!e ne8 /!allen&e# p #ed b7 te/!n l &7 and t!er fa/t r#2 b t! internal and eBternal; In t!e pa#t t!ree de/ade#2 IndiaL# ban9in& #7#tem !a# earned #e>eral ut#tandin& re&ulated b7 t!e RBI after amendment t t!e Ban9in&

a/!ie>ement# t it# /redit; T!e m #t #tri9in& i# it# eBten#i>e rea/!; It i# n l n&er / nfined t metr p li#e# r /itie# in India; In fa/t2 Indian ban9in& #7#tem !a# rea/!ed e>en t!e rem te / rner# f t!e / untr7; T!i# i# ne f t!e main a#pe/t# f IndiaL# &r 8t! #t r7;

Hi-t')y '( Ba+/i+g i+ I+dia T!e fir#t ban9 in India2 t! u&! / n#er>ati>e2 8a# e#tabli#!ed in ,HIK; Fr m ,HIK till t da72 t!e < urne7 f Indian Ban9in& S7#tem /an be #e&re&ated int t!ree di#tin/t p!a#e#0

Earl7 p!a#e f Indian ban9#2 fr m ,HIK t ,JKJ Nati nali:ati n f ban9# and t!e ban9in& #e/t r ref rm#2 fr m ,JKJ t ,JJ, Ne8 p!a#e f Indian ban9in& #7#tem2 8it! t!e ref rm# after ,JJ,

T0e Ba+/i+g St)uctu)e i+ I+dia T!e / mmer/ial ban9in& #tru/ture in India / n#i#t# f #/!eduled / mmer/ial ban9# and un#/!eduled ban9#; S/!eduled ban9# / n#titute t! #e ban9# t!at are in/luded in t!e Se/ nd S/!edule f Re#er>e Ban9 f India 'RBI( A/t2 ,J51; After t!e nati nali:ati n f ban9# in India2 t!e bran/!e# f t!e publi/ #e/t r ban9# r #e t appr Bimatel7 I.. per/ent in dep #it# and ad>an/e# t 9 a !u&e <ump b7 ,,2... per/ent; A# n 4une 5.2 ,JJJ2 t!ere 8ere 5.. #/!eduled ban9# in India !a>in& a t tal net8 r9 f K12J,I bran/!e#; T!e #/!eduled / mmer/ial ban9# in India / mpri#e State Ban9 f India and it# a## /iate# 'I(2 nati nali#ed ban9# ',J(2 f rei&n ban9# '1E(2 pri>ate #e/t r ban9# '5-(2 / + perati>e ban9#2 and re&i nal rural ban9#; Bef re t!e nati nali:ati n f Indian ban9#2 t!e State Ban9 f India 'SBI( 8a# t!e nl7 nati nali:ed ban92 8!i/! 8a# nati nali:ed n 4ul7 ,2 ,JEE2 under t!e SBI A/t f ,JEE; T!e nati nali:ati n f #e>en State Ban9 #ub#idiarie# t 9 pla/e in ,JEJ;

Nati'+ali1ati'+ 2)'ce-

,JEE0 Nati nali:ati n f State Ban9 f India ,JEJ0 Nati nali:ati n f SBI #ub#idiarie# ,JKJ0 Nati nali:ati n f ,1 ma< r ban9#

,JI.0 Nati nali:ati n f #e>en ban9# 8it! dep #it# >er R# -.. /r re

Ba+/- i+ I+dia In India2 ban9# are #e&re&ated in different &r up#; Ea/! &r up !a# it# 8n benefit# and limitati n# in perati n#; Ea/! !a# it# 8n dedi/ated tar&et mar9et; A fe8 f t!em 8 r9 in t!e rural #e/t r nl7 8!ile t!er# in b t! rural a# 8ell a# urban; Man7 ban9# are /aterin& in /itie# nl7; S me ban9# are f Indian ri&in and # me are f rei&n pla7er#; Ban9# in India /an be /la##ified int 0

$ubli/ Se/t r Ban9# $ri>ate Se/t r Ban9# C perati>e Ban9#

Re&i nal Rural Ban9# F rei&n Ban9#

Figu)e %& Hie)a)c0y '( Ba+/- i+ I+dia

Re-e)3e Ba+/ '( I+dia ,RBI. T!e Re#er>e Ban9 f India i# t!e /entral ban9 f ur / untr7; It 8a# e#tabli#!ed in April ,J5E 8it! a #!are /apital f R# E /r re n t!e ba#i# f t!e re/ mmendati n# f t!e *ilt n ) un& C mmi##i n; T!e #!are /apital 8a# di>ided int full7 paid #!are# f R# ,.. ea/!2 8!i/! 8a# entirel7 8ned b7 pri>ate #!are! lder# in t!e be&innin&; T!e & >ernment !eld #!are# f n minal >alue f R# --.2...;

T!e RBI / mmen/ed perati n n April ,2 ,J5E2 under t!e Re#er>e Ban9 f India A/t2 ,J51; T!e A/t 'II f ,J51( pr >ide# t!e #tatut r7 ba#i# f t!e fun/ti nin& f t!e Ban9; T!e Ban9 8a# / n#tituted t meet t!e f ll 8in& re"uirement#0

Re&ulate t!e i##ue f /urren/7 n te# Maintain re#er>e# 8it! a >ie8 t #e/urin& m netar7 #tabilit7 Operate t!e /redit and /urren/7 #7#tem f t!e / untr7 t it# ad>anta&e

C'**e)cial Ba+/C mmer/ial Ban9# are ban9in& in#tituti n# t!at a//ept dep #it# and &rant #! rt+term l an# and ad>an/e# t t!eir /u#t mer#; In additi n t &i>in& #! rt+term l an#2 / mmer/ial ban9# al# &i>e medium+term and l n&+term l an t bu#ine## enterpri#e#; N 8+a+da7# # me f t!e / mmer/ial ban9# are al# pr >idin& ! u#in& l an n a l n&+term ba#i# t indi>idual#; T!ere are al# man7 t!er fun/ti n# f / mmer/ial ban9#2 8!i/! are di#/u##ed later in t!i# le## n; C'4'5e)ati3e Ba+/$e ple 8! / me t &et!er t < intl7 #er>e t!eir / mm n intere#t ften f rm a / + perati>e # /iet7 under t!e C + perati>e S /ietie# A/t; A!en a / + perati>e # /iet7 en&a&e# it#elf in ban9in& bu#ine## it i# /alled a C + perati>e Ban9; S5eciali-ed Ba+/T!ere are # me ban9#2 8!i/! /ater t t!e re"uirement# and pr >ide >erall #upp rt f r #ettin& up bu#ine## in #pe/ifi/ area# f a/ti>it7; EFIM Ban92 SI%BI and NABAR% are eBample# f #u/! ban9#; T!e7 en&a&e t!em#el>e# in # me #pe/ifi/ area r a/ti>it7 and t!u#2 are /alled #pe/iali#ed ban9#; Ba+/i+g -ect') )e(')*-0

Ref rm# in t!e / mmer/ial ban9in& #e/t r !ad t8 di#tin/t p!a#e#0 ,(; T!e fir#t p!a#e f ref rm# intr du/ed #ub#e"uent t t!e relea#e f t!e Rep rt f t!e C mmittee n Finan/ial S7#tem 'C!airman0 M; Nar#im!am(2 ,JJ-2 f /u#ed mainl7 n enablin& and #tren&t!enin& mea#ure#; -(; T!e #e/ nd p!a#e f ref rm#2 intr du/ed #ub#e"uent t t!e re/ mmendati n# f t!e / mmittee n Ban9in& Se/t r Ref rm# 'C!airman0 M; Nar#im!am(2 ,JJI2 pla/ed &reater emp!a#i# n #tru/tural mea#ure# and impr >ement in #tandard# f di#/l #ure and le>el# f tran#paren/7 in rder t ali&n t!e Indian #tandard# 8it! t!en internati nal be#t pra/ti/e#; *en/e t!e 9e7 b<e/ti>e f ref rm# in t!e ban9in& #e/t r !a# been t en!an/e t!e #tabilit7 and effi/ien/7 f ban9#;T!e ref rm mea#ure# /an !en/e be br adl7 di>ided int t!ree main &r up#0 %.. E+a$li+g *ea-u)e- 8ere de#i&ned t /reate an en>ir nment 8!ere ban9# / uld

re#p nd ptimall7 t mar9et #i&nal# n t!e ba#i# f / mmer/ial / n#iderati n#; 6.. St)e+gt0e+i+g *ea-u)e- aimed at redu/in& t!e >ulnerabilit7 f ban9# in t!e fa/e f flu/tuati n# in t!e e/ n mi/ en>ir nment; T!e#e in/luded /apital ade"ua/72 in/ me re/ &niti n2 a##et /la##ifi/ati n and pr >i#i nin& n rm#2 di#/l #ure #tandard# et/; 7.. I+-tituti'+al *ea-u)e- f /u#ed n ref rm# in t!e le&al frame8 r9 pertainin& t ban9# and /reati n f ne8 in#tituti n#;

%.6 ABO!T STATE BANK OF INDIA

SBI i# t!e lar&e#t / mmer/ial ban9 in India in term# f a##et#2 dep #it#2 pr fit#2 bran/!e# and n f empl 7ee# empl 7ed; At t!e end f -.,-+,52 t!e Ban9 !ad t tal a##et# f R#;E2 KK2-K,;.1 /r re2 t tal dep #it# #i:e f R#;,-2.-2H1./r re and re/ rded a net pr fit f R#; ,12,.E /r re#; T!e Ban9 !a# a >a#t d me#ti/ net8 r9 f ,12I,K bran/!e# and #taff #tren&t! f -2 -I2-JK; State Ban9 Gr up2 8it! a net8 r9 f -.25-E bran/!e#2 in/ludin& E2E.J bran/!e# f it# fi>e A## /iate Ban9#2 d minate# t!e ban9in& indu#tr7 in India; In additi n t ban9in&2 t!e Gr up2 t!r u&! it# >ari u# #ub#idiarie# pr >ide# a ran&e f finan/ial #er>i/e#2 8!i/! in/lude Dife In#uran/e2 Mer/!ant Ban9in&2 Mutual Fund#2 Credit Card2 Fa/t rin&2 Se/urit7 tradin&2 $en#i n Fund Mana&ement2 Cu#t dial Ser>i/e#2 General In#uran/e and $rimar7 %ealer#!ip;
A--'ciate Ba+/-

T!e fi>e A## /iate Ban9# f SBI !a>e a mar9et #!are f K;,KM in dep #it# and K;5-M in ad>an/e# a# n la#t Frida7 f Mar/! -.,5; T!e perf rman/e !i&!li&!t# f A## /iate Ban9# a# n Mar/! -.,5 i# &i>en in Table -;

Ta$le 6 & 2e)(')*a+ce 0ig0lig0t- '( A--'ciate Ba+/2a)ticula)T tal A##et# A&&; %ep #it# T tal Ad>an/e# Operatin& $r fit Net $r fit A- '+ 7%.7.68%7 E2.12EEK 12,H2KEH 521.25-, I2I.5 52KHI A- '+ 7%.7.68%6 12512J1H 52K,2EIJ -2IJ2,1I I2-,1 52K-K C0a+ge,9. ,K;.. ,E;E, ,H;H. H;,H ,;15

SBI Gr up a/!ie>ed full / re ban9in& #tatu# in -..I 8!en all t!e bran/!e# f t!e Ban9 8ere made fun/ti nal n / re ban9in& #7#tem; T!i# rapid and / mmendable te/!n l &7 up+&radati n !a# 8 n t!e Ban9 man7 laurel#; T!e Ban9 al# en< 7# t!e di#tin/ti n f !a>in& t!e lar&e#t ATM net8 r9 in t!e / untr7 8it! >er 5-2HE- ATM# fr m De! in Dada9! t Kan7a9umari in Tamil Nadu;

Gl')i'u- Ba+/i+g T)aditi'+

T!e ri&in# f SBI date ba/9 t ,I.K2 8!en t!e Ban9 f Cal/utta 'later /alled t!e Ban9 f Ben&al( 8a# e#tabli#!ed; In ,J-,2 t!e Ban9 f Ben&al and t8 t!er pre#iden/7 ban9# + Ban9 f Madra# and Ban9 f B mba7 8ere amal&amated t f rm t!e Imperial Ban9 f India; In ,JEE2 t!e / ntr llin& intere#t# f t!e Imperial Ban9 f India 8ere a/"uired b7 t!e Re#er>e Ban9 f India 'RBI( and SBI 8a# /reated b7 a #pe/ial A/t f t!e $arliament t #u//eed t!e Imperial Ban9 f India; In it# bi&&e#t e>er /a#! pur/!a#e2 t!e G >ernment f India in 4une -..H a/"uired t!e entire RBI #!are! ldin& in State Ban9 f India / n#i#tin& f >er 5,1 milli n e"uit7 #!are# at a t tal am unt f >er R#;5EE billi n; T!e Ban9 !a# / mpleted >er -.E 7ear# f perati n#2 8it! an unbr 9en re/ rd f pr fitabilit7;
St)uctu)e a+d O)ga+i-ati'+

T!e SBI i# / mmitted t be#t pra/ti/e# in t!e area f / rp rate & >ernan/e; T!e Ban9 belie>e# t!at pr per / rp rate & >ernan/e fa/ilitate# effe/ti>e mana&ement and / ntr l f bu#ine##; T!i#2 in turn2 enable# t!e Ban9 t maintain a !i&! le>el f bu#ine## et!i/# and t ptimi:e >alue f r all it# #ta9e! lder#; T!e Ban9 !a# it# C rp rate Offi/e at Mumbai; At t!e !elm f affair# i# t!e Ban9L# Central B ard f %ire/t r#2 / mpri#in& #pe/iali#t# fr m >ari u# #e/t r#; T!e dire/t r# repre#ent t!e G >ernment f India2 RBI2 #!are! lder#2 8 r9men and n n+8 r9men #taff f t!e Ban9; T!ere are #e>eral independent and n n+eBe/uti>e dire/t r# apart fr m t!e eBe/uti>e dire/t r# n t!e B ard; T!e Ban9L# d me#ti/ perati nal area i# di>ided int ,1 Cir/le#2 ea/! 8it! ne D /al *ead Offi/e 'D*O(; T!e Ban9L# T p Mana&ement / n#i#t# f t!e C!airman2 f ur Mana&in& %ire/t r#2 and %eput7 Mana&in& %ire/t r#;
Ca5ital a+d S0a)e0'ldi+g 2atte)+

SBI 8a# t!e fir#t publi/ #e/t r ban9 t a//e## t!e d me#ti/ /apital mar9et in ,JJ1 t #! re up it# /apital ba#e; SBI A/t !a# been amended permittin& t!e Ban9 t brin& d 8n t!e G >ernment ! ldin& t E,M; T!e t tal number f #!are! lder# a# n 5,#t Mar/! -.,- 8a# R#H2-I2H-J 8it! t!e f ll 8in& 8ner#!ip pattern0
Ta$le 7& Ca5ital a+d S0a)e0'ldi+g 5atte)+ at SBI

S0a)e0'lde)$re#ident f India N n+re#ident# 'FII#=OCB#=NRI#=G%R#( Finan/ial In#tituti n# in/ludin& In#uran/e C mpanie#=Ban9# et/; Mutual Fund#=G >ernment C mpanie#=UTI $ri>ate C rp rate B die# Ot!er# in/ludin& Re#ident Indi>idual#

9 '( -0a)e0eld K-;5,5 ,5;5,.;JK 1;IE -;HE;I1

SBI A--'ciate- a+d Su$-idia)ie-

A net8 r9 f fi>e Indian ban9in& #ub#idiarie#2 / mpri#in& fi>e A## /iate Ban9#; State Ban9 f Bi9aner & 4aipur2 State Ban9 f *7derabad2 State Ban9 f M7# re2 State Ban9 f $atiala and State Ban9 f Tra>an/ re are en&a&ed in t!e bu#ine## f / mmer/ial ban9in& in t!e / untr7; A# a part f / n# lidati n2 t!e Ban9 mer&ed 8it! it#elf t8 f it# A## /iate Ban9#0 State Ban9 f Saura#!tra in Au&u#t -..I and State Ban9 f Ind re in Au&u#t -.,. and an t!er #ub#idiar72 SBI C mmer/ial and Internati nal Ban9 Dtd; 'SBICI( in -.,,; SBI !a# t!er d me#ti/ n n+ban9in& #ub#idiarie# pr >idin& >ari u# finan/ial #er>i/e# and al# !a# f rei&n #ub#idiarie#=< int >enture#=a## /iate#; T!e Ban9 i# a / +pr m ter f Credit Inf rmati n Bureau f India Dtd; 'CIBID( and Clearin& C rp rati n f India Dtd; 'CCID(; T!e Ban9 !a# #et up A##et Re/ n#tru/ti n C mpan7 'India( Dtd; 'ARCID( under SARFAESI A/t2 -..- < intl7 8it! #e>en t!er / mmer/ial ban9#;
Gl'$al Ma)/et-

Gl bal Mar9et# %epartment at C rp rate Centre mainl7 !andle# t!e Ban96# li"uidit7 and pr >ide# f rei&n eB/!an&e #er>i/e# t /u#t mer#; In additi n2 it al# !andle# / mplian/e 8it! re#er>e re"uirement f RBI2 pr >ide# pr du/t# li9e deri>ati>e#2 & ld f r8ard# and p rtf li mana&ement #er>i/e#2 and !andle# t!e Ban96# pr prietar7 tradin& and in>e#tment p rtf li ; T!e Ban9 i# ne f t!e Re&i#trar# f UI%AI 'Uni"ue Identifi/ati n Aut! rit7 f India(; After State & >ernment#2 SBI i# t!e t p enr ller f Aad!aar 'uni"ue I% number(;

C')e Ba+/i+g& A ma< r infra#tru/ture up&rade f !ard8are and data #t ra&e #7#tem !a# been underta9en f r %i#a#ter Re/ >er7 t en#ure uninterrupted and effi/ient perati n#2 redu/e pr /e##in& time and ma9e pr >i#i n f r #/alabilit7 f r future re"uirement#; Mile#t ne# f EK milli n pea9 tran#a/ti n# in a da72 -2.KH Tran#a/ti n# per #e/ nd and mana&in& 5.H milli n a// unt# a/!ie>ed; A /entrali#ed fun/ti nalit7 t &enerate #tatement f a// unt# f r Current A// unt /u#t mer#2 * me D an intere#t= in#tallment pa7ment /ertifi/ate# and T%R=ST%R intere#t paid durin& t!e 7ear 8it! T%S parti/ular# !a>e been r lled ut; ATM& State Ban9 Gr up !a# t!e lar&e#t #in&le ATM net8 r9 in t!e / untr7 8it! -H2-IK ATM# l /ated in e>er7 n 9 and / rner f t!e / untr7; State Ban9 Gr up !a# in it# #table2 9#2 #tatement f >ariant# f ATM# namel7 Bun/! N te A//ept r#2 Bi metri/ ATM#2 D 8 C #t Rural ATM#2 S lar $ 8ered ATM#2 Multi fun/ti n Ki #9# + f r printin& pa##b a// unt#2 bar / de reader# f r utilit7 bill pa7ment#2 internet ban9in&2 et/; I+te)+et Ba+/i+g& Internet ban9in& #er>i/e i# a>ailable t!r u&! 888; nline#bi;/ ;in f r b t! retail and / rp rate /u#t mer# f t!e Ban9; T!e Ban96# Internet Ban9in& pr du/t !a# been rated >er7 !i&! f r it# /u#t mer friendl7 u#er interfa/e and t!e ran&e f pr du/t# and #er>i/e# ffered t retail and / rp rate /u#t mer#; SBI NIn#tapa76 f r utilit7 bill# pa7ment2 CINB Saral a #implified #in&le u#er C rp rate Internet Ban9in& fa/ilit7 f r #mall entrepreneur# et/; !a# al# been intr du/ed; M'$ile Ba+/i+g& A ! #t f M bile Ban9in& #er>i/e#2 #u/! a# fund# tran#fer#2 en"uirie#2 demat a// unt en"uir72 /!e"ue b 9 re"ue#t#2 bill pa7ment#2 M bile T p+up2 re/!ar&in& f %T* #er>i/e#2 et/ are /urrentl7 bein& ffered; SBI i# t!e mar9et leader in t!i# #pa/e2 b t! in number and >alue f finan/ial tran#a/ti n#; T!e ne8 G$RS ba#ed m bile ban9in& #er>i/e :State Ba+/ F)eed'* 2)e*iu* !a# been r lled ut; M bile te/!n l &7 ba#ed prepaid pa7ment #er>i/e :State Ba+/ M'$i Ca-0 !a# been laun/!ed n pil t ba#i# in %el!i and Mumbai Cir/le# f t!e Ban9;

%.7 INTROD!CTION TO MERGERS ; AC<!SITIONS

In t!e &l bali:ed e/ n m72 Mer&er and A/"ui#iti n 'M&A( a/t# a# an imp rtant t l f r &r 8t! and eBpan#i n f a firm; T!e main m ti>e be!ind t!e M&A i# t /reate #7ner&7 t!at i# ne plu# ne i# m re t!an t8 and t!i# rati nale be&uile# t!e / mpanie# f r mer&er at t!e t u&! time#; M&A !elp t!e / mpanie# in &ettin& t!e benefit# f &reater mar9et #!are and / #t effi/ien/7; C mpanie# are / nfr nted 8it! t!e fa/t# t!at t!e nl7 bi& pla7er# /an #ur>i>e a# t!ere i# a /ut t!r at / mpetiti n in t!e mar9et and t!e #u//e## f t!e mer&er depend# n ! 8 8ell t!e t8 / mpanie# inte&rate t!em#el>e# in /arr7in& ut da7 t da7 perati n# CONCE2T!AL FRAMEWORK Me)ge) a+d a*alga*ati'+& T!e term mer&er r amal&amati n refer# t a / mbinati n f t8 r m re / rp rate int a #in&le entit7; It ma7 in> l>e eit!er0 ab# rpti n+ ne ban9 r m re ban9# / mbine t f rmer a ne8 entit7; In a/"uire# t!e t!er; C n# lidati n+ t8

India t!e le&al term f r mer&er i# amal&amati n; Ac=ui-iti'+& T!i# ma7 be defined a# an a/t f a/"uirin& effe/ti>e / ntr l b7 ne / rp rate >er t!e a##et# r mana&ement f t!e t!er / rp rate 8it! ut an7 / mbinati n f b t! f t!em; It /an be /!ara/teri:ed a# t!e / rp rate remain independent r t!e7 !a>e a #eparate le&al entit7;
Ty5e- '( *e)ge)-

T!ere are man7 t7pe# f mer&er# and a/"ui#iti n# t!at redefine t!e bu#ine## 8 rld 8it! ne8 #trate&i/ allian/e# and impr >ed / rp rate p!il # p!ie#; Fr m t!e bu#ine## #tru/ture per#pe/ti>e2 # me f t!e m #t / mm n and #i&nifi/ant t7pe# f mer&er# and a/"ui#iti n# are li#ted bel 80
H')i1'+tal Me)ge)& T!i# 9ind f mer&er eBi#t# bet8een t8 / mpanie# 8! / mpete in t!e

#ame indu#tr7 #e&ment; T!e t8 / mpanie# / mbine t!eir perati n# and &ain# #tren&t! in term# f impr >ed perf rman/e2 in/rea#ed /apital2 and en!an/ed pr fit#; T!i# 9ind

#ub#tantiall7 redu/e# t!e number f / mpetit r# in t!e #e&ment and &i>e# a !i&!er ed&e >er / mpetiti n;
"e)tical Me)ge)& Gerti/al mer&er i# a 9ind in 8!i/! t8

r m re / mpanie# in t!e #ame

indu#tr7 but in different field# / mbine t &et!er in bu#ine##; In t!i# f rm2 t!e / mpanie# in mer&er de/ide t / mbine all t!e perati n# and pr du/ti n# under ne #!elter; It i# li9e en/ mpa##in& all t!e re"uirement# and pr du/t# f a #in&le indu#tr7 #e&ment;
C'4Ge+e)ic Me)ge)& C +&eneri/ mer&er i# a 9ind in 8!i/! t8

r m re / mpanie# in

a## /iati n are # me 8a7

r t!e

t!er related t

t!e pr du/ti n pr /e##e#2 bu#ine##

mar9et#2 r ba#i/ re"uired te/!n l &ie#; It in/lude# t!e eBten#i n f t!e pr du/t line r a/"uirin& / mp nent# t!at are all t!e 8a7 re"uired in t!e dail7 perati n#; T!i# 9ind ffer# &reat pp rtunitie# t bu#ine##e# a# it pen# a !ue &ate8a7 t di>er#if7 ar und a / mm n #et f re# ur/e# and #trate&i/ re"uirement#;
C'+gl'*e)ate Me)ge)& C n&l merate mer&er i# a 9ind f >enture in 8!i/! t8

r m re

/ mpanie# bel n&in& t

different indu#trial #e/t r# / mbine t!eir

perati n#; All t!e

mer&ed / mpanie# are n 8a7 related t t!eir 9ind f bu#ine## and pr du/t line rat!er t!eir perati n# >erlap t!at f ea/! t!er; T!i# i# <u#t a unifi/ati n f bu#ine##e# fr m different >erti/al# under ne fla&#!ip enterpri#e r firm; REG!LATOR# ; LEGAL FRAMEWORK IN M;A T!e f ll 8in& are t!e le&al a/t# #upp rtin& t!e mer&er# and a/"ui#iti n# in t!e Indian ban9in& #e/t r0 %. C'*5a+ie- Act %>?@ Appr >al f t!e b ard f dire/t r# f indi>idual / mpanie# f r t!e draft pr p #al Appli/ati n in *i&! C urt Appr >al f #!are! lder# b7 HEM ma< rit7 San/ti n b7 t!e *i&! C urt Filin& f t!e / urt rder 8it! t!e Re&i#trar f C mpanie# 6. Ba+/i+g c'*5a+ie- ,Ac=ui-iti'+ ; T)a+-(e) '( !+de)ta/i+g-. Act %>A8

 Capital #tru/ture f / rre#p ndin& ne8 ban9 C n#titute t!e b ard f dire/t r# Re/ n#tituti n f a ne8 ban9 int t8 8it! an7 t!er ne8 ban9 7. Ba+/i+g )egulati'+ ActB %>C> Se/ti n 1E f t!e A/t2 RBI !a# t!e p 8er t / mpul# ril7 re/ n#tru/t r amal&amate a 8ea9 ban9 8it! an7 t!er ban9 Se/ti n 11A f t!e Ban9in& Re&ulati n A/t la7# d 8n t!e pr /edure f r amal&amati n f ban9in& / mpanie# Se/ti n 11B emp 8er# RBI in t!e matter f / mpr mi#e arran&ement# bet8een a ban9 and it# /redit r# Under Se/ti n 5K AE f t!e A/t2 t!e Central G >ernment /an under ad>i/e fr m RBI ta9e >er a 8ea9 ban9 $art+II C f t!e Ban9in& Re&ulati n A/t deal# 8it! t!e a/"ui#iti n f t!e underta9in& f ban9in& / mpanie#; Se/ti n 5K+AE f t!e Ban9in& Re&ulati n A/t deal# 8it! t!e p 8er f Central G >ernment t a/"uire underta9in&# f ban9in& / mpanie# in /ertain /a#e#; Se/;5K+AF deal# 8it! t!e p 8er# f Central G >ernment t ma9e #/!eme Se/ti n 5KAG deal# 8it! / mpen#ati n t be &i>en t #!are! lder# f t!e a/"uired ban9 T!e Central G >ernment n re/eipt f a rep rt fr m t!e RBI ma7 a/"uire a ban9in& / mpan7 if it fail# t / mpl7 8it! t!e dire/ti n# &i>en t it under Se/;-, r Se/; 5E+A f t!e Ban9in& Re&ulati n A/t; Similar a/ti n if Ban9in& C mpan7 i# bein& mana&ed in a manner detrimental t t!e intere#t f it# dep #it r#2 r a&ain#t t!e ban9in& p li/7 r publi/ intere#t;
4) R'le '( RBI i+ $a+/ *e)ge)-

r m re / rp rati n# r amal&amati n f an7 ne8 ban9

%eri>e# p 8er fr m ban9in& Re&ulati n A/t 'a# #e/ti n# #tated ab >e( Main r le i# t!e mer&er re>ie8 pr /e## 11+A f t!e Ban9in& Re&ulati n A/t2 ,J1J i# t!e emp 8erin& #e/ti n;

 %e/i#i n f mer&er !a# t be appr >ed b7 -=5rd f t!e t tal B ard f t!e re#pe/ti>e / mpanie#; Appli/able t $SU ban9# al# ; Appr >al b7 #!are! lder# 8it! -=5 ma< rit7 After appr >al t!e #/!eme #! uld be #ubmitted t RBI If t!e #/!eme i# #an/ti ned b7 t!e Re#er>e Ban92 b7 an rder in 8ritin&2 it be/ me# bindin& n t #!are! lder#; RBI !ad i##ued &uideline# in Ma7 -..E la7in& d 8n >ari u# re"uirement# f r t!e pr /e## f #u/! mer&er# in/ludin& determinati n f t!e #8ap rati 2 di#/l #ure#2 t!e #ta&e# at 8!i/! B ard# 8ill &et in> l>ed in t!e mer&er pr /e##2 et/; Br adl7 RBI 8ill eBamine t!e f ll 8in&0 T!e b<e/ti>e t be a/!ie>ed b7 t!e mer&er; A!at impa/t / uld t!e mer&er !a>e n t!e finan/ial mar9et#O A!at impa/t / uld be t!e /reati n# f me&a ban9 !a>e n m netar7 p li/72 t!e mana&ement f intere#t rate#O A!at t!reat t t!e Indian e/ n m7 8 uld be p #ed b7 t!e diffi/ultie# eBperien/ed b7 a me&a ban9 in it# internati nal a/ti>itie#O T!e impa/t t!at t!e mer&er mi&!t !a>e n t!e indu#tr7; T!e p ##ible / #t# and benefit# t /u#t mer and t #mall and medium #i:e bu#ine##e#2 in/ludin& t!e impa/t n ban9 bran/!e# t!e a>ailabilit7 f finan/in& pri/e2 "ualit7 and t!e a>ailabilit7 f #er>i/e#; T!e timin& and t!e # /i +e/ n mi/ impa/t f an7 bran/! /l #ure# re#ultin& fr m t!e mer&er; T!e manner in 8!i/! t!e pr p #al 8ill / ntribute t t!e internati nal / mpetiti>ene## f t!e finan/ial #er>i/e# #e/t r; >erall #tru/ture f t!e nl7 n t!e ban9in& / mpanie# / n/erned2 but al# n all t!eir

T!e manner in 8!i/! t!e pr p #al 8 uld indire/tl7 affe/t empl 7ment and t!e "ualit7 f < b# in t!e #e/t r2 8it! a di#tin/ti n made bet8een tran#iti nal and permanent effe/t#;

T!e manner in 8!i/! t!e pr p #al 8 uld in/rea#e t!e abilit7 f t!e ban9# t de>el p and ad pt ne8 te/!n l &ie#; Remedial #tep# t!at t!e mer&er appli/ant# 8 uld be 8illin& t ta9e t miti&ate t!e ad>er#e effe/t# identified t ari#e fr m t!e mer&er;

?. C'*5etiti'+ Act a+d C'*5etiti'+ C'**i--i'+ '( I+dia MRT$ A/t2,JKJ repla/ed b7 C mpetiti n A/t2-.. C mpetiti n C mmi##i n f India 't!e CCI( i# t!e ne8 #tatut r7 aut! rit7 t in"uire int alle&ed / ntra>enti n# f t!e A/t; Se/ E define# @C mbinati nP and la7# ut t!e rele>ant t!re#! ld# f r re&ulati n @C mbinati nP in/lude# mer&er#2 amal&amati n#2 a/"ui#iti n# and a/"ui#iti n# f C ntr l; Se/ti n K aut! ri:e# t!e CCI t a##et#2 > tin& ri&!t#2 r / ntr l; Se/ti n K',( #tate# t!at / mbinati n# t!at /au#e2 r are li9el7 t /au#e2 an appre/iable ad>er#e effe/t n / mpetiti n are pr !ibited; Se/ti n K'-(2 a# amended in -..H2 pr >ide# f r mandat r7 pre+mer&er n tifi/ati n 8it!in5. da7# f eit!er appr >al f t!e pr p #al f r a / mbinati n r eBe/uti n f t!e a&reement f r an a/"ui#iti n; CCI nl7 /!e/9# 8!et!er a / mbinati n 8ill li9el7 re#ult in d minan/e r li9el7 t fa/ilitate /arteli#ati n; It re&ulate# anti+/ mpetiti>e be!a>i ur; RODE OF CCI IN BANK MERGERS CCI d e# n t !a>e mu/! r le t pla7 in Ban9in& Mer&er# S far a# ban9in& mer&er# are / n/erned it i# a paper+ti&er; in>e#ti&ate / mbinati n# ab >e /ertain #i:e2 t!re#! ld#2 8!i/! in/lude# mer&er#2 amal&amati n#2 and a/"ui#iti n# f #!are#2

 It nl7 !a# t!e p 8er t determine 8!et!er t!e pr p #ed mer&er i# & in& t !a>e an anti+/ mpetiti>e and /arteli:ati n impa/t; It nl7 /!e/9# a p ##ibilit7 f d minan/e; It d e# n t !a>e t!e aut! rit7 t l 9 int t!e detail# f t!e #/!eme f mer&er; @. Late-t de3el'5*e+t4 Ba+/i+g LaD ,A*e+d*e+t .BillB68%% Sin/e t!e be&innin& f -.,,2 RBI !ad ur&ed t!e Finan/e Mini#tr7 t &i>e it t!e eB/lu#i>e / ntr l t deal 8it! ban9in& mer&er#; It # u&!t t!at t!e inter>enti n f t!e CCI in re#pe/t f ban9in& mer&er# be d ne a8a7 8it!; A// rdin&l72 in April -.,, t!e G >ernment tabled t!e Ban9in& Da8 'Amendment( Bill bef re t!e D 9 Sab!a in t!e m nt! f Mar/!2 -.,,; T!e amendment eBempt# mer&er# and a/"ui#iti n# in t!e ban9in& #e/t r fr m t!e #/rutin7 f t!e C mpetiti n C mmi##i n f India Se/ti n -A f T!e Ban9in& Da8# 'Amendment( Bill2 -.,, i# a# f ll 8#0 N t8it!#tandin& an7t!in& t t!e / ntrar7 / ntained in #e/ti n -2 n t!in& / ntained in t!e C mpetiti n A/t2 -..- #!all appl7 t an7 ban9in& / mpan72 t!e State Ban9 f India2 an7 #ub#idiar7 ban92 an7 / rre#p ndin& ne8 ban9 r an7 re&i nal rural ban9 r / + perati>e ban9 r multi+#tate / + perati>e ban9in& re#pe/t f t!e matter# relatin& t amal&amati n2 mer&er2 re/ n#tru/ti n2 tran#fer2 re/ n#tituti n r a/"ui#iti n under t!i# a/t t!e State Ban9 f India A/t2 ,JEE t!e State Ban9 f India 'Sub#idiar7 Ban9#( A/t2 ,JEJ t!e Ban9in& C mpanie# 'A/"ui#iti n and Tran#fer f Underta9in&#( A/t2,JH. t!e Re&i nal Rural Ban9# A/t2 ,JHK t!e Ban9in& C mpanie# 'A/"ui#iti n and Tran#fer f Underta9in&#( A/t2,JI. t!e Multi+State C + perati>e S /ietie# A/t2 -..- and an7 State la8 relatin& t / + perati>e # /ietie#;

HISTOR# OF MERGERS IN INDIAN BANKING IND!STR#

T!e Indian ban9in& #e/t r /an be di>ided int t8 era#2 t!e pre liberali:ati n era and t!e p #t liberali:ati n era; In pre liberali:ati n era & >ernment f India nati nali:ed ,1 Ban9# n ,J 4ul7,JKJ and later n K m re / mmer/ial Ban9# 8ere nati nali:ed n ,E April ,JI.; In t!e 7ear ,JJ5& >ernment mer&ed T!e Ne8 Ban9 number# f nati nali:ed Ban9# redu/ed fr m-. t f India and T!e $un<ab Nati nal Ban9 and t!i# 8a# t!e nl7 mer&er bet8een nati nali:ed ban9#2 after t!at t!e ,J; In p #t liberali:ati n re&ime2 & >ernment !ad initiated t!e p li/7 f liberali:ati n and li/en#e# 8ere i##ued t t!e pri>ate ban9# 8!i/! lead t t!e &r 8t! f Indian Ban9in& #e/t r; On ,5t! Au&u#t -.,.2 t!e pr /e## f M&A# in t!e Indian ban9in& #e/t r pa##e# t!r u&! t!e Ban9 f Ra<a#t!an and t!e ICICI Ban9; M re >er2 t!e *%FC Ban9 a/"uired t!e Centuri n Ban9 f $un<ab n -5 Ma7 -..I; T!e Re#er>e Ban9 f India #an/ti n# t!e #/!eme f mer&er# f t!e ICICI Ban9 and t!e Ban9 f Ra<a#t!an; After t!e mer&er t!e ICICI Ban9 repla/ed man7 ban9# t //up7 t!e #e/ nd p #iti n after t!e State Ban9 f India 'SBI( in term# f a##et# in t!e Indian One #i:e d e# n t fit f r all2 t!eref re man7 / mpanie# find# t!e be#t 8a7 t & a!ead li9e t eBpand 8ner#!ip pre/in/t# t!r u&! Mer&er and a/"ui#iti n#; Mer&er /reate# #7ner&7 and e/ n mie# f #/ale; F r eBpandin& t!e perati n# and /uttin& / #t#2 Bu#ine## entrepreneur and Ban9in& Se/t r are u#in& Mer&er and A/"ui#iti n# 8 rld8ide a# a #trate&7 f r a/!ie>in& lar&er #i:e2 in/rea#ed mar9et #!are2 fa#ter &r 8t!2 and #7ner&7 f r be/ min& m re / mpetiti>e t!r u&! e/ n mie# f #/ale; A mer&er i# a / mbinati n f t8 r m re / mpanie# int ne

/ mpan7 r it ma7 be in t!e f rm f ne r m re / mpanie# bein& mer&ed int eBi#tin& / mpanie# r a ne8 / mpan7 ma7 be f rmed t mer&e t8 r m re eBi#tin& / mpanie#; On t!e t!er !and2 8!en ne / mpan7 ta9e# >er an t!er / mpan7 and /learl7 8ell+ 9n 8n it#elf a# t!e ne8 8ner2 t!i# i# /alled A/"ui#iti n; T!e / mpanie# mu#t f ll 8 le&al pr /edure f Mer&er and A/"ui#iti n# 8!i/! !a# &i>en b7 RBI2 SEBI2 C mpanie#6 A/t ,JEK and Ban9in& Re&ulati n A/t ,J1J; Gr 8t! i# al8a7# t!e pri rit7 f all / mpanie# and / nfer# #eri u# / n/ern t eBpand t!e bu#ine## a/ti>itie#; C mpanie# & f r Mer&er and A/"ui#iti n# f r a/!ie>in& !i&!er pr fit and eBpandin& mar9et #!are; Mer&er and A/"ui#iti n# i# t!e need f bu#ine## enterpri#e# f r a/!ie>in& t!e e/ n mie# f #/ale2 &r 8t!2 di>er#ifi/ati n2 #7ner&72 finan/ial plannin&2 Gl bali:ati n f e/ n m72 and m n p li#ti/ appr a/! al# /reate# intere#t am n&#t / mpanie# f r Mer&er and A/"ui#iti n# in rder t in/rea#e t!e mar9et p 8er; Mer&er and A/"ui#iti n# i# n t a #in&le da7 pr /e##2 it ta9e# time and de/i#i n# are t be ta9en after eBaminin& all t!e a#pe/t#; Indian / mpanie# 8ere !a>in& #trin&ent / ntr l bef re e/ n mi/ liberali:ati nC t!eref re t!e7 led t t!e me##7 &r 8t! f t!e Indian / rp rate #e/t r durin& t!at peri d; T!e & >ernment initiated t!e ref rm after ,JJ, and 8!i/! re#ulted in t!e adaptati n f different &r 8t! and eBpan#i n #trate&ie# b7 t!e / mpanie#; T!e Ban9in& #7#tem f India 8a# #tarted in ,HH. and t!e fir#t Ban9 8a# t!e Indian Ban9 9n 8n a# t!e Ban9 f *indu#tan; Dater n # me m re ban9# li9e t!e Ban9 f B mba7+ ,I1.2 t!e Ban9 fMadra#+,I15 and t!e Ban9 f Cal/utta+,I1. 8ere e#tabli#!ed under t!e /!arter f Briti#! Ea#t India C mpan7; T!e#e Ban9# 8ere mer&ed in ,J-, and t 9 t!e f rm f a ne8 ban9 9n 8n a# t!e Imperial Ban9 f India; F r t!e de>el pment f ban9in& fa/ilitie# in t!e rural area# t!e Imperial Ban9 f India partiall7 nati nali:ed n , 4ul7 ,JEE2 and named a# t!e State Ban9 f India al n& 8it! it# I a## /iate ban9# 'at pre#ent E(; Dater n2 t!e State Ban9 f Bi9aner and t!e State Ban9 f 4aipur mer&ed and f rmed t!e State Ban9 f Bi9aner and 4aipur;
Ta$le C& Ta$le '( 2a-t *e)ge)- i+ I+dia+ $a+/i+g -ect')
DATE OF NAME OF THE TRANSFEROR BANK Ban9 f Bi!ar Dtd NAME OF THE MERGEREAMALGAMATION N >ember I2 ,JKJ TRANSFEREE BANK State Ban9 f India

Februar7 -.2 ,JH. 4ul7 -J2 ,JIE Au&u#t -12 ,JIE Au&u#t -K2 ,JIE %e/ember ,J2 ,JIK Ma7 ,52 ,JII O/t ber 5,2 ,JIJ Februar7 -.2 ,JJ. Februar7 -.2 ,JJ. Februar7 -.2 ,JJ. Au&u#t -J2 ,JJ. September 12 ,JJ5 ,JJ5+,JJ1 4anuar7 ,2 ,JJK April I2 ,JJH 4une 52 ,JJJ %e/ember --2 ,JJJ Februar7 -K2 -... Mar/! ,.2 -.., Ma7 52 -..4une -.2 -..Februar7 ,2 -..5 4une -E2 -..1 Au&u#t ,12 -..1 April -2 -..E O/t ber ,2 -..E September -2 -..K O/t ber 52 -..K Mar/! 5,2 -..H April ,J2 -..H Au&u#t -J2 -..H Ma7 -52 -..I Au&u#t ,52 -.,. Au&u#t -K2 -.,.

Nati nal Ban9 f Da! re Dtd Mira< State Ban9 Dtd Da9#!mi C mmer/ial Ban9 Dtd Ban9 f C /!in Dtd *indu#tan C mmer/ial Ban9 Dtd Trader# Ban9 Dtd; United Indu#trial Ban9 Dtd Ban9 f Tamilnadu Dtd; Ban9 f T!an<a>ur Dtd $arur Central Ban9 Dtd $urban/!al Ban9 Dtd; Ne8 Ban9 f India Ban9 f 9arad Dtd Ka#!iNat! Set! Ban9 Dtd Bari % ab Ban9 Dtd $un<ab C + perati>e Ban9 Dtd; Bareill7 C rp rati n Ban9 Dtd Si99im Ban9 Dtd Time# Ban9 Dtd Ban9 f Madura Dtd ICICI Dtd Benare# State Ban9 Dtd Nedun&adi Ban9 Dtd S ut! Gu<arat D /al Area Ban9 Dtd; Gl bal Tru#t Ban9 Dtd; I%BI Ban9 Dtd Ban9 f $un<ab Dtd Gane#! Ban9 f Kurund8ad Dtd United Ae#tern Ban9 Dtd B!arat O>er#ea# Ban9 Dtd; San&li Ban9 Dtd D rd Kri#!na Ban9 Dtd; Centuri n Ban9 f $un<ab Dtd T!e Ban9 f Ra<a#t!an State Ban9 f India

State Ban9 f India Uni n Ban9 f India Canara Ban9 State Ban9 f India $un<ab Nati nal Ban9 Ban9 f Bar da Alla!abad Ban9 Indian O>er#ea# Ban9 Indian Ban9 Ban9 f India Central Ban9 f India $un<ab Nati nal Ban9 Ban9 f India State Ban9 f India Oriental Ban9 f C mmer/e Oriental Ban9 f C mmer/e Ban9 f Bar da Uni n Ban9 f India *%FC Ban9 Dtd ICICI Ban9 Dtd; ICICI Ban9 Dtd Ban9 f Bar da $un<ab Nati nal Ban9 Ban9 f Bar da Oriental Ban9 f C mmer/e I%BI Dtd Centuri n Ban9 Dtd Federal Ban9 Dtd I%BI Dtd; Indian O>er#ea# Ban9 ICICI Ban9 Dtd Centuri n Ban9 f $un<ab Dtd; *%FC Ban9 Dtd ICICI Ban9 Dtd State Ban9 f Ind re

6.% OBFECTI"ES OF ST!D#

SBI i# t!e bi&&e#t / mmer/ial ban9 in India in term# f it# earnin&#; It i# t!e t p publi/ #e/t r ban9 in India am n&#t t!e t p ,.. ban9# >er t!e 8 rld; S if mer&ed effe/ti>el7 8it! it# A## /iate# it ma7 lead t !a>e a #tr n&er mar9et #!are in t!e ban9in& #e/t r; Fundamental rea# n m ti>atin& SBI mer&er 8it! it# E a## /iate ban9# i# be/au#e f t!e ld 5S f rmula 8!i/! SBI !a# i;e; #i:e2 #/ale2 and #7ner&7; Mer&er# /an be a & d idea be/au#e t!e /ultural trend# f ll 8ed b7 SBI and it# a## /iate# are #imilar; T!i# 8ill redu/e t!e p #t mer&er /ultural i##ue# &enerall7 b#er>ed el#e8!ere; T!e Mer&er f State Ban9 f India i# al# &uided b7 t!e Central G >ernment6# b<e/ti>e f /reatin& a &l bal #i:e ban9 f r India 8!i/! /an #tand at par 8it! t!e /!art f ban9# in t!e internati nal finan/ial ar/!ite/ture; Ba#ed n t!i# ba/9&r und t!e main b<e/ti>e# f t!i# #tud7 are0 ,( T #tud7 t!e mer&er# in Indian ban9in& #e/t r; -( T #tud7 pr fitabilit7 f pa#t mer&er# f State ban9 f India 8it! it# A## /iate#; 5( T #tud7 t!e and find ut 8!i/! a## /iate f State ban9 f India 8ill be t!e be#t alternati>e t mer&e 8it!;

6.6 METHODOLOG#

F r t!e anal7#i# f t!e pa#t mer&er# f a## /iate# rati # li9e pr fitabilit7 rati #2 li"uidit7 rati #2 &r 8t! indi/at r#2 and Capital ade"ua/7 rati # !a>e been u#ed t d t!e pre+ p #t mer&er anal7#i#; Interpretati n# !a>e been dra8n n t!e rati # 8!i/! !a>e been /al/ulated in M# EB/el2 ba#ed n t!e #tandal ne balan/e #!eet and pr fit and l ## #tatement# f State ban9 f India; F r t!e Galuati n f A## /iate# ban9# f State Ban9 f India2 CA$M and %i#/ unted Ca#! Fl 8 !a# been u#ed; T!e inf rmati n re&ardin& t!e a## /iate ban9# !a>e been / lle/ted t!r u&! t!eir re#pe/ti>e annual rep rt#2 Re#er>e ban9 f India < urnal#; T!e indi/e# u#ed f r /al/ulati n under CA$M are f und 5K1 T+Bill rate( ut fr m 8eb#ite# li9e Rueter# 'f r Beta /al/ulati n(2 B mba7 St /9 eB/!an&e 'f r Ban9eB IndeB( and Re#er>e Ban9 f India 'f r

6.7 LIMITATIONS OF THE ST!D#

It 8a# a /!allen&e t >alue all a## /iate# a# State Ban9 f $atiala and State Ban9 f *7derabad are n t $ubli/ li#ted / mpanie#; T!e Beta rate u#ed f r /al/ulatin& t!e / #t f e"uit7 i# ta9en t be t!at f State Ban9 f India a# a 8! le; %CF anal7#i# al# !a# it# #!are f #! rt/ min&#; F r #tarter#2 t!e %CF m del i# nl7 a# & d a# it# input a##umpti n#; %ependin& n 8!at ne belie>e# ab ut ! 8 a / mpan7 8ill perate and ! 8 t!e mar9et 8ill unf ld2 %CF >aluati n# /an flu/tuate 8ildl7; If t!e input# + free /a#! fl 8 f re/a#t#2 di#/ unt rate# and perpetuit7 &r 8t! rate# + are 8ide f t!e mar92 t!e fair >alue &enerated f r t!e ban9 8 nLt be a//urate2 and it 8 nLt be u#eful 8!en a##e##in& #t /9 pri/e#; %CF 8 r9# be#t 8!en t!ere i# a !i&! de&ree f / nfiden/e ab ut future /a#! fl 8#; But t!in&# /an &et tri/97 8!en a / mpan7L# perati n# la/9 >i#ibilit7 + t!at i#2 8!en itL# diffi/ult t predi/t #ale# and / #t trend# 8it! mu/! /ertaint7; A!ile f re/a#tin& /a#! fl 8# a fe8 7ear# int t!e future i# !ard en u&!2 pu#!in& re#ult# int eternit7 i# nearl7 imp ##ible; T!e in>e#t rL# abilit7 t ma9e & d f r8ard+l 9in& pr <e/ti n# i# /riti/al + and t!atL# 8!7 %CF i# #u#/eptible t err r; Galuati n# are parti/ularl7 #en#iti>e t a##umpti n# ab ut t!e perpetuit7 &r 8t! rate# and di#/ unt rate#;

7. ANAL#SIS OF 2AST MERGERS OF ASSOCIATE BANK

T!e f ll 8in& #e/ti n #ummari#e# t!e $a#t mer&er f State Ban9 f India 8it! State ban9 f Saura#!tra in -..I and State Ban9 f Ind re in -.,. STATE BANK OF SA!RASHTRA %ate f a/"ui#iti n %ep #it# Ad>an/e# N ; f empl 7ee# N ; f bran/!e# 0 ,5t! Au&u#t2 -..I 0 0 0 0 R#; ,E2H-, /r; R#; ,-21-H /r; KJ.. 1K, ' ut f 8!i/! 1.. 8ere in Gu<arat & K, in t!er #tate#(

B)ea/ u5 '( e*5l'yee-& Offi/er# A8ard #taff Sub rdinate T'tal 0 -,E5 0 5,-H 0 ,K-. & @>88

HIGHLIGHTS OF MERGER State Ban9 f India n -Et! Au&u#t -..H &a>e it# pr p #al t mer&e 8it! State Ban9 f Saura#!tra; Mer&er 8a# #ub<e/t t appr >al f t!e & >ernment and Re#er>e Ban9 in a// rdan/e 8it! State Ban9 f India A/t2 ,JEE; In a / mmuni/ati n t t!e B mba7 St /9 EB/!an&e2 SBI #aid it# /entral b ard ,JEE; n Au&u#t -E appr >ed t!e mer&er2 #ub<e/t t appr >al f t!e & >ernment and Re#er>e Ban9 in a// rdan/e 8it! State Ban9 f India A/t2

SBS 8a# t!e #malle#t f t!e #e>en a## /iate# and ba#ed n t!e eBperien/e SBI 8 uld l 9 at t!er ban9#; SBIL# intere#t in t!e a## /iate ban9# ran&e# fr m HE+,.. per /ent; SBS !ad 1K. bran/!e# and t!e mer&er 8 uld !elp eliminate dupli/ati n f bran/!e# in t!e #ame area; It# net pr fit r #e 1E per /ent t R# IH;1 /r re in -..K+.H; T!e ban9 !a# paid+up e"uit7 /apital f R# 5,1 /r re; T!e mer&er !elped SBI / n# lidate it# p #iti n a# t!e / untr7L# bi&&e#t ban9 and 8iden t!e &ap 8it! neare#t ri>al at t!at time 8!i/! 8a# ICICI Ban9; Ait! J2EHJ bran/!e#2 SBI !ad t tal a##et# f R# E2KK2EKE /r re and p #ted a net pr fit f R# 12E1, /r re a# n Mar/! 5,2 -..H; T!e ban9 8a# al# l 9in& at freein& up /apital b7 #ettin& up a ! ldin& / mpan7 f r it# life in#uran/e and a##et mana&ement bu#ine##e#; STATE BANK OF INDORE %ate f a/"ui#iti n %ep #it# Ad>an/e# N ; f empl 7ee# N ; f bran/!e# 0 -Kt! Au&u#t2 -.,. 0 0 0 0 R#; -H2 ,.E /r; R#; -,2,I. /r; K,I5 1H- 'Rural+,-.2 Su+,1-2 Urban+ IH2 Metr +,-52 in ,E #tate#

& , UT( 3 ut f 1H-2 5IJ bran/!e# in M;$ & C!!atti#&ar!(

HIGHLIGHTS OF MERGER T!e SBI 8it! t!e #an/ti n f G >t; f India entered int ne& tiati n# 8it! State Ban9 f Ind re f r t!e a/"ui#iti n n O/t I2 -..J; T!e B ard f %ire/t r# f State Ban9 f Ind re On O/t ber 5,2 -..J2 appr >ed t!e Sc0e*e '( Ac=ui-iti'+ '( State Ba+/ '( I+d')e ,SBIN. b7 SBI2 under Se/ti n 5E f t!e SBI A/t2 ,JEE; SBI ann un/ed a #!are #8ap rati f 510,.. f r t!e mer&er; T!at mean#2 SBI 8 uld &i>e

it# 51 #!are# f r e>er7 ,.. #!are# f State Ban9 f Ind re !eld b7 min rit7 #!are! lder#;

F r t!i# purp #e2 SBI 8 uld i##ue up t

>er ,;,K la9! #!are# f fa/e >alue R# ,. ea/! t

min rit7 #!are! lder# f State Ban9 f Ind re; After t!e mer&er2 t!e i##ued /apital f SBI 8 uld in/rea#e fr m R# K51;JK /r re up t a maBimum f R# K5E;.I /r re; B t! t!e ban9# #eparatel7 and independentl7 app inted M=# *arib!a9ti& / mpan7 '"ualified /!artered a// untant# and M=# ABi# Ban9 ltd; 'Cate& r7 , mer/!ant ban9er#( a# t!e independent >aluer#; M=# K ta9 Ma!indra /apital / mpan7 ltd;'Cate& r7 , mer/!ant ban9er#( 8a# app inted b7 b t! t!e ban9# independentl7 t pr >ide a fairne## pini n t >aluati n f t!e independent >aluer#; After t!e mer&er2 SBI 8ill be left 8it! fi>e a## /iate ban9#2 State Ban9 f Bi9aner and 4aipur2 State Ban9 f Tra>an/ re2 State Ban9 f $atiala2 State Ban9 f M7# re and State Ban9 f *7derabad; Am n& t!e#e2 t!e State Ban9# f Bi9aner and 4aipur2 M7# re and Tra>an/ re are li#ted / mpanie#;

7.% ANAL#SIS OF 2AST MERGERS OF SBI

T!e $a#t mer&er f State Ban9 f Saura#!tra and State Ban9 f Ind re and t!e effe/t f t!e mer&er n t!e ! ldin& / mpan7 i# !i&!li&!ted bel 8 u#in& rati anal7#i#;
Ta$le ?& 2)'(ita$ility )ati'- t)e+d '( State Ba+/ '( I+dia 2ROFITABILIT# RATIOS Return n A##et# Return n E"uit7 NIM Return n Net A rt!'M( Ma)48G , 2)e. ,;., ,.;KK -;E5 ,5;HMa)48> ,2'-t. ,;.1 ,1;5H -;-K ,E;H1 Ma)4%8 ,2)e. .;II ,1;11 -;55 ,5;IJ Ma)4%% ,2'-t. .;H, ,,;K, -;HH ,-;H, Ma)4%6 .;II ,H;1K 5;5J ,5;J1

INTER2RETATION Retu)+ '+ a--et- ,ROA.0 T!i# &i>e# an indi/ati n a# t ! 8 mu/! pr fit a ban9 i# able t &enerate fr m t!e a##et#; *i&!er >alue f t!i# rati i# indi/ati>e f !i&!er pr fitabilit72 and !en/e2 pr du/ti>it7; T!ere i# a in/rea#e in ROA after t!e mer&er Mar/! -.,,2 after t!e mer&er ade"uate; T0e )etu)+ '+ e=uity ,ROE.2 defined a# t!e rati f net pr fit# after taB t t tal e"uit7 f State ban9 f State ban9 f Saura#!tra in Mar/! -..J i;e after t!e mer&er t!e a##et# 8ere pr perl7 utili:ed; A!erea# in f Ind re t!e fi&ure# depi/t &raduall7 de/rea#in& in return n a##et# 8!i/! #! 8# ban9 perf rman/e n a##et# i# n t & in&

/apital2 i#2 t!eref re2 u#ed a# an alternati>e mea#ure f pr fitabilit7; T!e R E indi/ate# t!e am unt f pr fit# a bu#ine## unit i# &eneratin& f r it# e"uit7 in>e#t r#; T!e rati i# 8idel7 u#ed b7 e"uit7 in>e#t r# in t!eir de/i#i n ma9in&; *i&!er >alue f t!e rati i# indi/ati>e f !i&!er pr fitabilit72 and !en/e2 pr du/ti>it7; T!e ROE !a# in/rea#ed after mer&er f State ban9 f Saura#!tra 8!erea# de/rea#ed after mer&er f State ban9 f Ind re

Net I+te)e-t Ma)gi+ ,NIM.0 T!e net intere#t mar&in i# t!e differen/e bet8een t!e t tal intere#t earned 'in/ludin& fr m #u/! item# a# in>e#tment#( and t tal intere#t eBpended; 'In/ludin& n #u/! item# a# inter+ban9 b rr 8in&#(2 n rmali#ed b7 a##et#; T!i# rati ! 8 effe/ti>el7 t!e ban9# depl 7 all t!eir fund# 'b t! dep #it and indi/ate# a# t

b rr 8in&#( t &enerate in/ me fr m /redit and in>e#tment perati n#; *i&!er t!e rati 2 t!e m re effi/ient i# t!e ban9in& #7#tem; *ere t!e rati l 8er# d 8n after t!e mer&er f State Ban9 f Saura#!tra t!i# mean# t!e effi/ien/7 f t!e ban9 !a# de/rea#ed; A!erea#2 in t!e /a#e f State Ban9 f Ind re t!e rati !a# been in/rea#ed t!i# mean# t!e effi/ien/7 f t!e ban9 !a# been in/rea#ed Retu)+ '+ i+3e-t*e+t ,ROI. i# t!e per/ent f return n /apital empl 7ed in t!e bu#ine##; *i&!er t!e return t!e m re effi/ient t!e ban9 i#; T!e ROI !a# de/rea#ed after b t! t!e mer&er#; It mean# t!e return n t!e in>e#tment !a# been n t been & Saura#!tra and !a>e de/lined after mer&er f State Ban9 f Ind re;
Ta$le @& CRAR t)e+d '( State Ba+/ '( I+dia Ma) CA2ITAL Ma) H8G H8> ,2'-t. ,1;-E ADE<!AC# ,2)e. Capital Ade"ua/7 Rati ,5;1H Ma) H%8 ,2)e. ,5;5J Ma) H%% ,2'-t. ,,;JI ,5;IK Ma) H%6

d; All t!e#e rati #

#! 8 t!at t!e pr fitabilit7 indi/at r# !a>e been in/rea#ed after mer&er f State ban9 f

Capital t Ri#9 Aei&!ted A##et# Rati 'CRAR(0 T!i# mea#ure# t!e am unt f a ban96# /apital in relati n t it# ri#9+8ei&!ted /redit eBp #ure# and i# m #t 8idel7 u#ed a# a mea#ure f # undne## f ban9#; In t!er 8 rd#2 it determine# t!e /apa/it7 f a ban9 t 8it!#tand t!e uneBpe/ted l ##e# ari#in& ut f it# perati n#; T!e !i&!er t!e /apital ade"ua/7 rati a ban9 !a#2 t!e &reater t!e /apa/it7 it !a# t ab# rb t!e uneBpe/ted l ##e# bef re be/ min& in# l>ent; T!u#2 it pr >ide# a N/u#!i n6 f r p tential l ##e#2 8!i/! pr te/t# t!e ban96# dep #it r# r t!er lender#; After t!e mer&er 8it! State ban9 f Saura#!tra in Mar/! -..I+.J t!e CAR !a# impr >ed and t!e ban9 !ad in/rea#ed it#

/apa/it7 t ab# rb uneBpe/ted l ##e#; And t!at f State ban9 f Ind re !a# redu/ed after it# mer&er in Mar/! -.,.+,,;
Ta$le A&Li=uitdity )ati'- '( State Ba+/ '( I+dia

LI<!IDIT# RATIOS Current rati Qui/9 rati

Ma) H8G ,2)e. .;.H K;,E

Ma) H8> ,2'-t. .;.1 E;H1

Ma) H%8 ,2)e. .;.1 J;.H

Ma) H%% ,2'-t. .;.1 I;E

Ma) H%6 .;.E ,-;.E

INTER2RETATION Cu))e+t )ati' mea#ure# 8!et!er r n t a / mpan7 !a# en u&! re# ur/e# t pa7 it# debt >er t!e neBt bu#ine## /7/le b7 / mparin& firm6# /urrent a##et# t /urrent liabilitie#; A !i&! rati indi/ate# a #afe li"uidit7 but al# it /an be a #i&nal t!at t!e / mpan7 !a# pr blem# &ettin& paid n it# re/ei>able r !a>e l n& in>ent r7 turn >er; T!e li"uidit7 p #iti n f State ban9 f India after mer&er 8it! State ban9 f Saura#!tra !a# been redu/ed indi/atin& t!reat t t!e li"uidit7 p #iti n f t!e ban9; A!erea# t!ere i# n /!an&e in t!e /urrent rati after t!e mer&er f State ban9 f Ind re; <uic/ )ati' i# an indi/at r f / mpan76# #! rt term li"uidit7; It mea#ure# t!e abilit7 t u#e it# "ui/9 a##et# t pa7 it# /urrent liabilitie#; If "ui/9 rati i# !i&!er2 / mpan7 ma7 9eep t mu/! /a#! n !and r !a>e a pr blem / lle/tin& it# a// unt# re/ei>able; *i&!er "ui/9 rati i# needed 8!en t!e / mpan7 !a# diffi/ult7 b rr 8in& n #! rt term n te#; T!e rati !a# de/rea#ed after b t! t!e mer&er# but it d e#n6t !a>e #i&nifi/ant impa/t a# t!e rati i# mu/! !i&!er t!an t!e re"uired #tandard f ,0,;

Ta$le G& G)'Dt0 i+dicat')- '( State Ba+/ '( I+dia

GROWTH INDICATO R E$S $=E Rati %i>idend pa7 ut rati --;K1 --;J -5;5K -K;.5 --;EJ Ma) H8G ,2)e. ,.K;EK ,E;1E Ma) H8> ,2'-t. ,15;KH K;JI Ma) H%8 ,2)e. ,11;5H ,5;I1 Ma) H%% ,2'-t. ,,K;.H -5;,,H1;,E ,,;I, Ma) H%6

Ea)+i+g- 5e) -0a)e are t!e p rti n f / mpanie# pr fit all /ated t ea/! ut#tandin& #!are f / mm n #t /9;E$S #er>e# a# an indi/at r f / mpan76# pr fitabilit7; E$S f SBI !a# in/rea#ed after t!e mer&er f State ban9 f Saura#!tra in -..I+.J t!i# mean# t!e f State pr fitabilit7 f / mpan7 !a# in/rea#ed after t!e mer&er; A!erea# after t!e mer&er

ban9 f Ind re in -.,.+,, t!ere i# a #!arp fall in E$S indi/atin& de/rea#e in pr fitabilit7; 2EE )ati' i# t!e rati f / mpan76# #!are pri/e t it# earnin&# per #!are; It tell# 8!et!er t!e

#!are pri/e f a / mpan7 i# fairl7 >alued2 under>alued r >er>alued; T!ere i# a #!arp fall in t!e $=E rati after mer&er f State ban9 f Saura#!tra indi/atin& t!e in>e#t r# after t!e mer&er eBpe/ted le##er &r 8t! f / mpan76# earnin&# in t!e future; A!erea# after t!e mer&er f State Ban9 f Ind re t!ere i# a ri#e in $=E rati indi/atin& in>e#t r# eBpe/t# a !i&!er &r 8t! f / mpan76# earnin&#; Di3ide+d 5ay'ut )ati' i# t!e rati i# a mea#ure f di>idend per #!are di>ided b7 earnin&# per #!are; It ut t it# #!are! lder# a#

f ! 8 mu/! earnin&# a / mpan7 i# pa7in&

/ mpared t ! 8 mu/! it i# retainin& f r rein>e#tment; A !ealt!7 di>idend pa7 ut rati lead# t in>e#t r / nfiden/e in t!e / mpan7; T!ere !a# been an in/rea#e in t!e di>idend pa7 ut rati after b t! t!e mer&er# leadin& t in/rea#e in t!e in>e#t r6# / nfiden/e;

7.6 "AL!ATION OF ASSOCIATE BANKS

Galuati n te/!ni"ue i# t!e pr /e## f determinin& t!e e/ n mi/ >alue f a bu#ine## r / mpan7; Bu#ine## >aluati n /an be u#ed t determine t!e fair >alue f a bu#ine## f r a >ariet7 f rea# n#2 in/ludin& #ale >alue2 e#tabli#!in& partner 8ner#!ip and di> r/e pr /eedin&#;
Figu)e 6& "aluati'+ Met0'd-

T!ere are #e>eral te/!ni"ue# t >alue a bu#ine##; Br adl72 t!e#e /an be /la##ified int 0 Earnin&# ba#ed >aluati n2 Mar9et ba#ed >aluati n and A##et ba#ed >aluati n;

 Ea)+i+g- $a-ed 3aluati'+ ta9e# int / n#iderati n t!e future earnin&# f t!e bu#ine## and !en/e t!e appr priate >alue depend# n pr <e/ted re>enue# and / #t# in future2 eBpe/ted /apital utfl 8#2 number f 7ear# f pr <e/ti n2 di#/ untin& rate and terminal >alue f bu#ine##; T! r u&! dili&en/e !a# t be eBer/i#ed in de/idin& t!e#e ab >e fa/t r# #in/e t!e#e fa/t r# 8 uld differ fr m #e/t r t #e/t r and / mpan7 t / mpan7; Ma)/et $a-ed a55)'ac0 determine# t!e / mpan7 >alue b7 / mparin& ne r m re a#pe/t# f t!e #ub<e/t / mpan7 t t!e #imilar a#pe/t# f t!er / mpan7 8!i/! !a>e e#tabli#!ed mar9et >alue; T0e a--et $a-ed 3alue / n#ider# eit!er t!e b 9 >alue a##et# net liabilitie# r t!e net ad<u#ted >alue re>alued net a##et#; If t!e / mpan7 !a# intan&ible a##et# li9e brand#2 / p7ri&!t#2 intelle/tual pr pert7 et/;2 t!e#e are >alued independentl7 and added t t!e net a##et >alue t arri>e at t!e bu#ine## >alue; S metime#2 if t!e bu#ine## 8ere n t t be a/"uired n a & in& / n/ern ba#i#2 t!e li"uidati n >alue r t!e reali:ati n fr m #ale f a##et# i# / n#idered f r t!e purp #e f >aluati n; Timin& i# >er7 /riti/al 8!ile di>e#tin& a bu#ine## #in/e >aluati n depend# n t!e timin&; Timin& f #ale i# /ru/ial 9eepin& in mind e/ n mi/ /7/le#2 #t /9 mar9et #ituati n# 8!i/! 8 uld de/ide mar9et multiple#2 &l bal #ituati n# et/; T!e reti/all72 t!e %CF i# t!e m #t # und met! d %CF met! d i# m re in8ard+l 9in&2 rel7in& f /u#ed f >aluati n; T!e %CF met! d i# f t!e

f r8ard+l 9in& and it depend# m re future eBpe/tati n# rat!er t!an !i#t ri/al re#ult#; T!e n t!e fundamental eBpe/tati n# bu#ine## r a##et2 and i# influen/ed t a le##er eBtent b7 > latile eBternal fa/t r#; It i# n /a#! fl 8 &enerati n and i# le## affe/ted b7 a// untin& pra/ti/e# and a##umpti n#; It al# all 8# eBpe/ted peratin& #trate&ie# t be fa/t red int t!e >aluati n; And m re >er it al# all 8# different / mp nent# f a bu#ine## r #7ner&ie# t be >alued #eparatel7;

STE2S IN "AL!ATION OF ASSOCIATE BANKS Di-c'u+ted Ca-0 Fl'D Met0'd Ste5 %0 C #t f E"uit7 'Ke( QRf R S 'Rm+Rf( A!ere Rf Q ri#9 free rate f return i;e;i# t!e eBpe/ted return n ri#9+free #e/uritie# S Q Beta a mea#ure f t!e #7#temati/ ri#9 f State ban9 f India6# / mm n #t /9; RmQ Ri#9 premium *ere Rf i# ta9en a# 5K1 trea#ur7 bill rate a# n 5,#t Mar/! -.,5 Rm i# ta9en a# &r 8t! in ban9eB indeB in t!e la#t 7ear; Ste5 6& C #t f %ebt 'Kd( Q Intere#t=%ebt T,.. Ste5 7& Aei&!ted A>era&e / #t f /apital

Ste5 C& Free Ca#! Fl 8# 'FCF( Q NO$AT R %epre/iati n U CA$EF U VNAC A!ere2 W NO$AT i# e"ual t EBIT ',+t( W %epre/iati n i# n n+/a#! peratin& /!ar&e# in/ludin& depre/iati n2 depleti n2 and am rti:ati n re/ &ni:ed f r taB purp #e#; W CA$EF i# /apital eBpenditure# f r fiBed a##et#; W VNAC i# t!e in/rea#e in net 8 r9in& /apital defined a# /urrent a##et# le## t!e n n+ intere#t bearin& /urrent liabilitie#; Ste5 ?0 Terminal Galue f firm Q Terminal >alue Q

CALC!LATION OF COST OF E<!IT# FOR STATE BANK GRO!2 C #t f e"uit7 Q H;HJR ,;,1',.;J,+H;HJ( Q,,;5E

"AL!ATION OF ASSOCIATE BANKS 'N te0 All fi&ure# are in R#; Cr re( %. State Ba+/ '( Bi/a+e) ; Fai5u) C #t f e"uit7 'Ke( QH;HJ R.;JJ',.;J,+H;HJ( Q ,.;II C #t f debt 'Kd( Q Intere#t = %ebt T,.. Q 1J5-;5H =HH2JEI;-E T ,.. Q K;55 Aei&!ted A>era&e / #t f /apital

Q .;..J RK;5-1T.;IK QE;11K1 Calculati'+ '( F)ee ca-0 (l'D*ere2 NO$AT Q KK1E;-E ', 3 .;,1( Q EH,1;J,E %epre/iati n Q EH;,E CA$EF Q -J;E VNAC Q ,.E-1;HJ

FCF Q ,K-KH;5EE

Terminal >alue Q

Te)*i+al "alue '( (i)*I7?G>.G6 6. State $a+/ '( T)a3a+c')e C #t f E"uit7 Q H;HJ R,;.5',.;J,+H;HJ( Q ,,;.. C #t f debt 'Kd( Q Intere#t = %ebt T,.. QKE.K;K1=J525H.;IIT,.. QK;JH Aei&!ted A>era&e / #t f /apital

-.HH(

Q .;..K R K;JH T .;HJ-5 Q E;E5 Calculati'+ '( F)ee ca-0 (l'D*ere2 NO$AT QHIEH;KE',+ .;-.HH(

Q K--E;K%epre/iati nQ . CA$EF Q 15;.VNAC Q 'JJK,;K5( FCF Q NO$AT R %epre/iati n U CA$EF 3 VNAC Q ,K,11;-5

Terminal >alue Q

Te)*i+al "alue '( (i)* I 7%66.7C 7. State Ba+/ '( My-')e C #t f /apital Q H;HJ R.;J5',.;J,+H;HJ( C #t f debt 'Kd( Q Intere#t = %ebt T,.. Q 1,-E;-I = K.2I-5;-1 T,.. Q K;HI Aei&!ted A>era&e / #t f /apital Q

Q .;..I R K;HH T.;EJI5 Q 1;,

Cal/ulati n f /a#! fl 8# *ere2 NO$AT Q,55,;.5 ',+ .;1.,H( Q HJK;5K %epre/iati n Q 1H;.1 CA$EFQ ,--1;5J VNAC Q '5-1-;.E( FCF Q 5.15;.K

Terminal >alue Q

Te)*i+al "alue '( (i)* I G?G.8? C. State Ba+/ '( 2atiala C #t f debt 'Kd( Q Intere#t = %ebt T,.. Q H,,5;1-KH=II1.;K.,T,.. Q I.;1K Aei&!ted A>era&e / #t f /apital Q

Q .;.5K R HE;15T .;II,H Q KK;E1

Cal/ulati n f FCF *ere2 NO$ATQ HIKJ;K1- ',+ .;,,I5( Q KJ5I;KK %epre/iati n Q E-;55 CA$EF Q -5;H5 VNACQ '555;,K( FCFQ H5..;1Terminal Galue Q

Te)*i+al "alue '( (i)* I%67.78 ?. State Ba+/ '( Hyde)a$ad C #t f debt 'Kd( Q Intere#t = %ebt T,.. Q -2--1;1.=E11I;1-T,.. Q 1.;I5 Aei&!ted A>era&e / #t f /apital Q

Q.;.15 R 1.;KHE T .;IE.K Q 51;JK Cal/ulati n f /a#! fl 8#

*ere NO$ATQ -2KH,;..',+.;,1JE( Q--H,;KJ %epre/iati n Q 5H;J1 CA$EF Q 5E;.5 VNACQ ',KHI1;-E( FCF Q ,J.EI;IE Terminal Galue Q

Te)*i+al "alue '( (i)* I@CC.C8

C. CONCL!SION AND RECOMMENDATIONS

After u#in& t!e %CF >aluati n met! d2 a trend 8!i/! !a# been n ti/ed i# t!at t!e >alue f $ubli/ li#ted a## /iate ban9# i# &reater t!an t!at f t!e Ban9# 8!i/! are n t li#ted i;e; State Ban9 f $atiala and State Ban9 f *7derabad; T!e a## /iate ban9 8it! t!e !i&!e#t >alue f firm i# f und ut t be State Ban9 f Bi9aner & 4aipur 8it! R#5EJ. /r re 2 8!erea# State Ban9 f Tra>an/ re f ll 8# /l #el7 be!ind 8it! t!e >alue f R#; 5,-- /r re; T!e differen/e bet8een t p - a## /iate Ban9# i# f R#; 1KH /r re; E>en t!e number f bran/!e# f State Ban9 f India 8 uld in/rea#e fr m ,1I,K t ,EIE5 and Number f empl 7ee# 8 uld in/rea#e fr m --I-JK t -1,,-H if mer&er 8it! State Ban9 f Bi9aner & 4aipur Figu)e 7& C'*5a)i-'+ '( A--'ciate Ba+/- $a-ed '+ t0ei) "alue

C n#iderin& t!e limitati n# f t!e #tud7 a# 8ell a# t!e eBternal e/ n mi/ fa/t r# pre>ailin& in t!e indu#tr72 SBI ma7 /! #e t mer&er eit!er f t!e t8 ;T!e fir#t preferen/e a// rdin& t t!e #tud7 bein& State ban9 f Bi9aner & 4aipur;

BIBLOGRA2H#

Retrieved june !13" #r$% St&te '&n( $# Tr&v&n)$re* +++.,t&te-&n($#tr&v&n)$re.)$%. Retrieved /une !13" #r$% St&te '&n( $# 0&ti&1&* +++.,-2.)$.in. Retrieved /une !13" #r$% St&te '&n( $# M3,$re* +++.,t&te-&n($#%3,$re.)$.in. Retrieved /une !13" #r$% St&te -&n( $# Indi&* 4tt2*..+++.,-i.)$.in. Retrieved /une !13" #r$% St&te '&n( $# 43der&-&d* +++.,-43d.)$%. Retrieved june !13" #r$% St&te '&n( $# 'i(&ner & /&i2ur* 4tt2,*..+++.,--j-&n(.)$%. Retrieved /une !13" #r$% Reuter,* 4tt2*..in.reuter,.)$%. Retrieved /une !13" #r$% Re,erve '&n( $# Indi&* +++.r-i.$r5.in. Retrieved /une !13" #r$% M$ne3 C$ntr$1* +++.%$ne3)$ntr$1.)$%. Retrieved #r$% 'SE* +++.-,eindi&.)$%. Retrieved #r$% e)$n$%i)ti%e,.indi&ti%e,.)$%. '$,e" j. 6 !!7). Bank mergers -The indian scenerio 61 ed." 8$1. 1). 6/. '$,e" Ed.) 93der&-&d" Indi&* /': T4e I)#&i Univer,it3 0re,,. C4&21in,(3" S." & S)4i11" M. /. 6 !!!). Valuation Analysis for Mergers and Acquisitions. C4&r1$tte,vi11e" 8A* Univer,it3 $# 8ir5ini& D&rden S)4$$1 ;$und&ti$n.