MERGERS & ACQUISITIONS IN BANKING SECTOR

As far as retail banking is concerned, most of the Indian private sector banks are
becoming more aggressive. They are following the acquisition route for getting
more and more retail customers, NPAs notwithstanding. So do you think you are
fighting an uneven battle, because firstly the rules do not allow you to acquire
Indian banks and secondly, there are restrictions on the number of branches you
can open. The only way to expand in India will be to acquire a foreign bank
overseas (which has operations in India).
During the last few years the Indian Banking system has witnessed some very high
profile mergers, such as the merger of ICICI Ltd. With its banking arm ICICI Bank
Ltd. The merger of Global Trust Bank with Oriental Bank of Commerce and more
recently the merger of IDBI with its banking arm IDBI Bank Ltd.
Foreign banks are likely to succeed in their niche markets and be the innovators in
terms of technology introduction in the domestic scenario. While their focused
operations, lower but more productive employee force etc will stand them good,
possible acquisitions of PSU banks will definitely give them the much needed
scale of operations and access to lower cost of funds. These banks will continue to
be the early technology adopters in the industry, thus increasing their efficiencies.
Also, they have been amongst the first movers in the lucrative insurance segment.
Already, banks such as ICICI Bank and HDFC Bank have forged alliances with
Prudential Life and Standard Life respectively. This is one segment that is likely to
witness a greater deal of action in the future. In the near term, the low interest rate
scenario is likely to affect the spreads of majors. This is likely to result in a greater
focus on better asset-liability management procedures. Consequently, only banks
that strive hard to increase their share of fee-based revenues are likely to do better
in the future.
Some of the past merged banks are -
Times Bank with HDFC Bank,
Bank of Rajasthan with ICICI Bank,
Nedungadi Bank Ltd. With Punjab National Bank
Global Trust Bank merged with Oriental Bank of Commerce
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