Conference Proceeding Published in International Journal of Trend in Research and Development
(IJTRD), ISSN: 2394-9333, www.ijtrd.com
Impact of Mergers & Acquisitions on Selected Banks
Jyothi.L
Asst. Professor, Kairalee Nikethan Golden Jubilee Degree College, Indiranagar, Bangalore, India
Abstract: Banking sector plays very important role in every
economy & is one of the fastest growing sectors in India. The
competition is extreme & regardless of the challenge from the
global banks, domestic banks- both public & private sector.
There are many indications that weak banks will merge will
strong banks. Mergers & Acquisitions encourage banks to
gain global reach, better synergy, compete with global banks &
allow banks to acquire the Non-performing assets of weaker
banks. Through Mergers & Acquisitions, banks will get brand
names, new geographies, and correspondent product offerings
but also opportunities to cross sell to new accounts acquired by
the other banks. The main objective of this paper is to assess
the impact of merger & acquisition on the performance of
bank. This study is based on the secondary data collected from
Magazines, Newspaper, journals etc.
Keywords: Merger, Acquisitions, Banking sector, Growth
I. INTRODUCTION
Bank is a financial institution, which performs various
functions like accepting deposits, lending loans to agricultural
& industrial concerns. Banking sector plays vital role in the
economic development of the country. Without stable &
effective banking system, no country can grow. India is a
world’s largest emerging economic giant. For the past few
years, India’s Banking system has grown very rapidly.
Merger is a combination of two companies to form one
company. Acquisitions is one company taken over by the other
company. The banks with bad loans & weak operating metrics
are to be merge with stronger banks for more efficient banks.
Merger & Acquisition will allow banks to have lot more
resources & their lending cost will come down. The merged
banks can competitive with large private banks in mid & large
corporate segments. Merger is a long process. Initially these
mergers are likely to face many operational challenges.
II. LITERATURE REVIEW
Sanjay Sharma & Sahil Sidana (2017) in their paper gave an
overview of impact of SBI merger on financial condition of
SBI. The SBI will get visibility at global level in the network
increase of SBI & it also able to provide cheaper funds more
easily. The gross & net NPA of SBI will come down after
merger with their associate. The efficiency & effectiveness of
the business will increased because of single management. [1]
Devrajappa.S. this paper gave an overview of Mergers of
HDFC Bank Ltd & Centurion Bank of Punjab Ltd. the result
suggested that after merger of the banks the financial
performance of banks have increased. This study revealed after
merger there was an improvement in the return on equity, debt
equity ratio. [2]
III. RESEARCH DESIGN
A. Objective of the Study
i. To know the advantages of Mergers &
Acquisitions.
ii. To know the reasons for Mergers & Acquisitions.
National conference on Economic Slowdown: Measures to Revive the Paranoid (ESMRP-19) Organised by Department of
Commerce and Management, Kairalee Niketan Golden Jubilee Degree College, 25th September 2019
iii. To analysis the impact of Mergers &
Acquisitions on Selected Banks.
B. Research Tools
i. Secondary Data: Bank of Baroda’s, Vijaya Bank
& Dena Bank past 5 financial year data
collected, Debt Equity Ratio, Current Ratio,
Asset Turnover Ratio, Net Profit Margin Ratio,
Net Operating Profit per share ratio, Non-
performing assets.
C. Scope of the study
i. The study is restricted to the impact of Bank of
Baroda, Vijaya bank & Dena Bank.
ii. The study is based on last four financial year data
of BOB, Vijaya Bank & Dena Bank.
D. Limitations of the Study
i. The study compares the past four-year’s financial
data after merger. The affected banks performance
may improve after some years.
III. MERGER’S & ACQUISITIONS
A. Overview of Merger’s & Acquisitions in India [3]
Mergers of banks began in India in the year 1960s in order to
bond weaker banks with the stronger banks & to protect the
customer interests. After the liberalization in 1991 there was a
major economic reforms made by the Government of India. In
august 25 2017, SBI fist merged State Bank of Saurashtra with
itself. After two years, State Bank of Indore was merge with it.
In 2017 SBI merge all its five associate & Bhartiya Mahila
Bank. This resulted in SBI being one amongst the 50 largest
banks in the world. The government had merged Dena Bank &
Vijaya Bank with Bank of Baroda in the year 2018. Recently
government has announced merger of 10 public sector banks.
The four sets of banks are to be merged are Canara Bank &
Syndicate Bank; Indian Bank & Allahabad Bank; Union Bank
of India, Andhra Bank & Corporation.
B. Reasons of Merger & Acquisitions
i. Bigger Banks: By merging BOB, Vijaya Bank & Dena
Bank, it will become third largest bank in the country.
It can provide services to large customer base. The
network of Dena Bank & Vijaya Bank will help the
BOB to reach micro & rural market.
ii. Improved recognition: The other two-bank branches
presence will add to the network in western & southern
states for BOB. The BOB will take benefit from some
unique projects from other two banks.
iii. Poor Performance of Banking Sector: Due to current
market situation many banks share prices has fallen
very badly because of underperformance of many
banks.
iv. Bad loans & failure to recover: As far as NPA is
concerned, BOB had 4.26%. After merging with Dena
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 Conference Proceeding Published in International Journal of Trend in Research and Development
(IJTRD), ISSN: 2394-9333, www.ijtrd.com
Bank, which as much higher NPAs, the new NPA of 2016 0.05 0.05 0.08
combined entity will be 4.80%.[4] 2017 0.04 0.06 0.08
C. Benefits of Merger & Acquisition 2018 0.05 0.10 0.09
Source: www.moneycontrol.com
i. After merger & acquisition, the merged entity can
compete with the private sector banks & global banks. Analysis & Interpretation: Current ratio measures the
ii. The customers of each Bank will benefit by way of solvency of the firm in the short term. The higher current ratio
larger number of branch & ATM network & have wide shows that the bank is able to pay its short-term obligations
access to credit card facilities. It will provide wide within a year. From the above table Bank of Baroda, Vijaya
range of products & services to their customers. Bank & Dena Bank are relatively has stable current ratio after
iii. The 120+ million customers will experience superior the acquisition deal.
banking services & benefit from wider product range
C. Asset Turnover Ratio
of service, which includes cash management solution,
supply chain financing, wealth management. Bank of Vijaya Dena
iv. The merger will also provide benefits to corporate Year
Baroda Bank Bank
customers of the Dena Bank because they were facing 2015 0.06 0.09 0.09
restrictions on borrowings from the bank. (Limitations 2016 0.07 0.09 0.08
imposed by RBI under Prompt Corrective Action). 2017 0.06 0.08 0.08
v. Bank of Baroda will take benefit from some unique
2018 0.06 0.08 0.07
projects from other two-banks (Plantation financing
Source: www.moneycontrol.com
from Vijaya Bank).
D. Overview of Selected Banks Analysis & Interpretation: It compares the turnover with the
assets that business has used to generate that turnover. From
Bank of Baroda: the Maharaja Sayajirao Gaekwad III the above table Bank of Baroda, Vijaya Bank & Dena Bank
founded the Bank of Baroda on 20 July 1908. BOB is an have stable turnover ratio.
Indian state-owned international bank headquarter in Vadodara
& corporate office is in Mumbai. It is the second largest bank D. Net Profit Margin Ratio
after SBI. The bank has 107 branches/offices in 24 countries,
38 branches of its 8 subsidiaries. The government of India Bank of Vijaya
Year Dena Bank
Baroda Bank
awarded the bank with the first prize in the Indira Gandhi
Rajbhasha Shield. [5] 2015 7.91 3.58 2.46
2016 -12.24 3.15 -8.78
Vijaya bank: a group of farmers led by A.B. Shetty on 23 2017 3.27 6.06 -8.48
October 1931 established Bank in Mangalore. It was one of the 2018 -5.57 5.77 -21.53
nationalized public sector bank in India with the head office in Source: www.moneycontrol.com
Bangalore, Karnataka. The bank has been opening Basic
Savings Bank Account under Pradhan Mantri Jan Dhan Yojana E. Analysis & Interpretation
& providing all account holders with rupay debit card. [6] Net Profit Margin ration is the percentage of Profit Company
Dena Bank: Devkaran Nanjee founded it on 26 May 1938, produces from its total revenue. From the above table all
under the name Devkaran Nanjee Banking Company. It merged entity shows decline in the net profit margin ratio. So
adopted its new name as Dena Bank & incorporated as a public the merger activity of Bank of Baroda, Vijaya Bank & Dena
company in December 1939. It was an Indian Public sector Bank will effect on their leftover earnings.
bank & headquarter in Mumbai with 1874 branches. The bank F. Net operating Profit Per Share Ratio
was founded in the year 1938 & nationalized it in 1969. [7].
Bank of Vijaya
IV. Findings & Analysis Year Dena Bank
Baroda Bank
A. Debt Equity Ratio 2015 194.27 142.86 191.81
2016 191.22 129.57 159.62
Bank of Vijaya 2017 183.15 123.94 129.35
Year Dena Bank
Baroda Bank
2018 164.60 96.54 39.54
2015 16.39 22.56 16.04
Source: www.moneycontrol.com
2016 15.11 20.78 17.32
2017 15.69 19.68 17.26 Analysis & Interpretation: Net operating Profit share ratio
2018 15.07 16.73 11.92 indicates how well the company can generate profit to its
Source: www.moneycontrol.com shareholders. From the observation table reveals that there has
been decline in the Net operating profit per share after
Analysis & Interpretation: Debt Equity Ratio measure the
acquisition deal. Because many investor thought merger of
relationship between the capital contributed by shareholders &
these banks might face integration issues & NPA post-merger.
creditors. From the above table, Bank of Baroda, Vijaya bank
& Dena Bank has decline in the debt equity ratio. It shows that G. Non-performing Asset
banks are using internal sources of funds.
Bank of Vijaya
B. Current Ratio Year Dena Bank
Baroda Bank
Bank of Vijaya Dena 2015 1372.22 1659.81 19046.46
Year 2016 3322.32 4276.82 18080
Baroda Bank Bank
2015 0.02 0.03 0.03 2017 7735.12 1660.00 23483

National conference on Economic Slowdown: Measures to Revive the Paranoid (ESMRP-19) Organised by Department of
Commerce and Management, Kairalee Niketan Golden Jubilee Degree College, 25th September 2019 52 | P a g e
 Conference Proceeding Published in International Journal of Trend in Research and Development
(IJTRD), ISSN: 2394-9333, www.ijtrd.com
2018 7839.00 5021.24 15609.50
Source: www.moneycontrol.com
Analysis & Interpretation: Non-performing asset is the asset
when it ceases to generate income for the bank. From the
above observation, the table reveals that Dena Bank & Vijaya
Bank has high level of NPA. The Bank of Baroda had 4.26%
of NPA but now Dena Bank has much higher NPA, which
result in increase in the NPA of combined entity.
SUGGESTIONS
1. Instead of reducing NPA the banks has to recover them.
Banks must be very careful while providing loans to the
borrowers because the money is from the people who
will be having their accounts in the banks.
2. The bulk of NPAs are loans given to corporates. The
bank has to take strict actions against the defaulters &
they have to file criminal complaints against such
defaulters.
3. At present situation, banks are extremely important for
economy recovery. Due to this merger, the banks are
going too bound with merger activities for the next one
year.
References
[1] Sanjay Sharma & Sahil Sidana 2017, ‘Impact of SBI
Merger on Financial Condition of SBI’ (ICRTTIEI-17)
ISBN: 978-93-86171-74-0
[2] Devarajappa S. 2012, ‘Mergers in Indian Banks: A
study on Mergers of HDFC Bank Ltd & Centurion
Bank of Punjab Ltd.’ International Journal of
Marketing, Financial Services & Management
Research ISSN 2277 3622.
[3] https://www.mbauniverse.com/group-
discussion/topic/business-economy/banks-merger-in-
india
[4] https://economictimes.indiatimes.com/industry/bankin
g/finance/banking/despite-weaker-denabob-has-
minimal-impact-on-npas-post-
merger/articleshow/68676737.cms
[5] https://en.wikipedia.org/wiki/Bank_of_Baroda
[6] https://en.wikipedia.org/wiki/Vijaya_Bank
[7] https://en.wikipedia.org/wiki/Dena_Bank

National conference on Economic Slowdown: Measures to Revive the Paranoid (ESMRP-19) Organised by Department of
Commerce and Management, Kairalee Niketan Golden Jubilee Degree College, 25th September 2019 53 | P a g e