Synopsis Submitted to Devi Ahilya Visiwavidyalaya Indore.

On 11/9/2009 Under faculty of Commerce, For the Degree of Doctor of Philosophy.

“A study of Impact of Mergers in Banking business in India on share holders earning (with special reference to State Bank of India and State Bank of Indore).”

Supervisor DR.Chhaya Mishra Asst. Prof. of Commerce, Shri Cloth Market Girls Commerce College, Ganesh Ganj Indore.

Researcher Deepesh Mahajan Faculty Management, Govind Ram Sakseria Inst. of Management & Research, Indore.

Research Centre: Shri Cloth Market Girls Commerce College, Ganesh Ganj Indore.

1

The Government of India nationalized the Imperial Bank of India in 1955. One or more companies may merge with an existing company or they may merge to form a new company. In 2008. SBI is the largest bank in India. making it the oldest commercial bank in the Indian Subcontinent. The concept and philosophy behind its establishment was to provide a nation wide banking network and to curb unregulated practices which were a prime cause of social injustice. The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta.Title of the Thesis: “A study of Impact of Mergers in Banking business in India on share holders earning (with special reference to State Bank of India and State Bank of Indore). SBI provides a range of banking products through its vast network in India and overseas. including products aimed at NRIs. Consolidation A consolidation is a combination if two or more combines into a new company. and renamed it the State Bank of India.” Introduction: Mergers: A merger occurs when two or more companies combines and the resulting firm maintains the identity of one of the firms. has the largest branch network in India. In this form of merger all companies are legally dissolved and a new entity is created. With an asset base of $250 billion and $195 billion in deposits. 2. with over 16000 branches. It has a market share among Indian commercial banks of 2 . Absorption Absorption is a combination of two or more companies into an existing company. Merger through consolidation. State Bank of India (SBI) a premium and the largest bank in India which is a Government sponsored agency. being a PSU bank also it has earned name and fame across the globe specially standing firmly in subprime crisis in America and melt down in equity market globally. Merger may take two forms1. In consolidation the acquired company transfers its assets. liabilities and share of the acquiring company for cash or exchange of assets. with the Reserve Bank of India taking a 60% stake. Usually the assets and liabilities of the smaller firms are merged into those of larger firms. The State Bank Group. it is a regional banking behemoth. Merger through absorption. All companies except one loose their identify in a merger through absorption. the Government took over the stake held by the Reserve Bank of India.

which is India's central bank. the Reserve Bank of India. Pursuant to the provisions of the State Bank of India Act (1955). which has branches throughout the country. In Nepal SBI owns 50% of Nepal SBI Bank. namely. it operates as INMB Bank . State Bank of India (Mauritius). Hong Kong. In 1982. Bahrain. and State Bank of India (Canada).about 20% in deposits and advances. which now has seven branches. It now has five branches in Nigeria. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act. The Presidency banks amalgamated on 27 January 1921. Sydney. The State bank of India is 29th most reputable company in the world according to Forbes. and were the result of the royal charters. SBI has tried to reduce its over-staffing through computerizing operations and Golden handshake schemes that led to a flight of its best and brightest managers. It has offshore banking units in the Bahamas. State Bank of India has presence in Dubai International Financial Centre. Historical Background: The roots of the State Bank of India rest in the first decade of 19th century. The Canadian subsidiary was also established in 1982 and also has seven branches. India's largest bank. The bank has 52 branches. In Indonesia it owns 76% of PT Bank Indo Monex. All three Presidency banks were incorporated as joint stock companies. This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. United Arab Emirates. New York. later renamed the Bank of Bengal. State Bank of India (California). Dubai. The Imperial Bank of India continued to remain a joint stock company. In Moscow SBI owns 60% of Commercial Bank of India. Johannesburg. four in the greater Toronto area. Male in the Maldives. with Canara Bank owning the rest. agencies or offices in 32 countries. London and environs. and Tokyo. and representative offices in Bhutan and Cape Town. the bank established its California subsidiary. Dhaka. Osaka. The government of India is the largest shareholder in SBI. On 30 April 1955 the Imperial Bank of India became the State Bank of India. was established on 2 June 1806. It has branches of the parent in Colombo. In Nigeria. and Singapore. and the reorganized banking entity took as its name Imperial Bank of India. and three in British Columbia. Frankfurt. acquired a controlling interest in the Imperial Bank of India. The Bank of Bengal and two other Presidency banks. when the Bank of Calcutta. International Presence: Regional office of the State Bank of India (SBI). the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). a right they retained until the formation of the Reserve Bank of India.State Bank of India already has a branch in Shanghai and plans to open one up in Taiwan. and SBI accounts for almost one-fifth of the nation’s loans. Los Angeles. The Govt. In 1990 it established an offshore bank. These managers took the retirement allowances and then became senior managers at new private sector banks. It has two subsidiaries in North America. Muscat. in Mumbai. of India 3 .SBI operates several foreign subsidiaries or affiliates.

following the acquisition. Originally. 2008. one of its Associate Banks. The acquisition of State Bank of Indore will help SBI add 470 branches to its existing network of 11. State Bank of Travancore.recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority. For instance.3% in the bank. and together these six banks constitute the State Bank Group. the government integrated these banks into State Bank of India to expand its rural outreach. Also. enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries. SBI was the acquirer as its affiliate.119 crore as on March 2009. All use the same logo of a blue keyhole and all the associates use the "State Bank of" name followed by the regional headquarters' name. Furthermore on 19th June 2009 the SBI board approved the merger of its subsidiary. 1960. who held the shares prior to its takeover by the government. State Bank of Indore.448. and the balance 1. SBI has acquired local banks in rescues. already had an extensive network in Kerala. State Bank of Saurashtra. with itself. the then seven banks that became the associate banks belonged to princely states until the government nationalized them between October. There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline operations. The first step along these lines occurred in September 2008 when State Bank of Saurashtra merged with State Bank of India. In tune with the first Five Year Plan. 1959 and May. The Subsidiaries of SBI till date       State Bank of Indore State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore 4 . in 1985. Total assets of SBI and the State Bank of Indore stood at Rs 998.77% is owned by individuals. SBI holds 98. emphasizing the development of rural India. it acquired Bank of Cochin in Kerala. SBI’s total assets will inch very close to the Rs 10lakh crore mark. which reduced the number of state banks from seven to six. On Sept 13. Associate banks: There are six associate banks that fall under SBI. In 1959 the Government passed the State Bank of India (Subsidiary Banks) Act. merged with State Bank of India. which had 120 branches.

Ltd – Bank assurance (Life Insurance) SBI Funds Management Pvt Ltd SBI Canada Organization Structure: The Bank's Board of Directors. It is the only Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating and various other rankings. Reserve Bank of India and State Bank of India. In recent years. Gwalior. The top management team consists of Managing Director. There are 9 Regional Offices at Indore.448 branches and a further 6500+ associate bank branches. Mumbai & Delhi. (NSDL) as well as CSDL (Central Depository Securities Ltd. most notably during Chandra Shekhar's tenure as Prime Minister of India. comprises nominees of Union Government. State Bank of India has electronically networked all of its branches under Core Banking System(CBS). The Bank also extends diverse merchant banking services and is registered with SEBI as category I Merchant Banker. The Bank has decentralized operational set up with four Zonal Offices at Indore. Managing Director is appointed by SBI in consultation with Bank's Board of Directors and with the approval of the RBI. the bank has sought to expand its overseas operations by buying foreign banks. Guna and Raipur. The CEO. Each ZO is headed by a Dy.Growth State Bank of India has often acted as guarantor to the Indian Government. General Manager. Jabalpur. More than 8500 ATMs across India. The Chairman of SBI is the ex-officio Chairman of the Board of Directors. The State Bank of India has had steady growth over its history. Chief General Manager and six General Managers. The Bank is an authorized dealer in Foreign Exchange and has a full fledged Foreign Department at Mumbai and correspondents at all major financial/commercial centres through out the world. industry and academics besides workmen/officers' nominee directors. Bhopal. The Bank has become Depository Participant of National Securities Depository Ltd. With 11. There are separate senior functionaries to look after various functional and developmental activities. The bank has one of the largest ATM networks in the region.) 5 . Bhopal. Group companies         SBI Capital Markets Ltd SBI Mutual Fund (A Trust) SBI Factors and Commercial Services Ltd SBI DFHI Ltd SBI Cards and Payment Services Pvt Ltd SBI Life Insurance Co. though it was marred by the Harshad Mehta scam in 1992. the SBI has extensive coverage. from the field of commerce.

ensuring progressive corporate excellence using state of the art technology. which had been established in 1936 and had been the first bank in Dewas district. Services:       Corporate Banking Verified by VISA MasterCard Secure Code Foreign Travel Card SBI Express Remit Bill Payment. be it traditional.  To create and maintain assets of quality so as to emerge as a healthier and stronger Bank as per parameters of international standards.State Bank of Indore: State Bank of Indore (Indore Bank) is one of the nationalized banks in India and a subsidiary of State Bank of India. Indore State awarded the Bank a monopoly for 10 years.f. and subscribed to the Bank's share capital. while maintaining the social orientation and national objectives. Online Shopping 6 . It uses the same logo as its parent company SBI. 2009.  To emerge as an important component and strong representative of State Bank Group in its 'core area' of operation and carve out a well defined position within the group. the business turnover of State Bank of Indore has crossed Rs. developmental or innovative. located on the Malwa Plateau. just north of the Vindhya Range.e. In the medium term.50000 crore. 1971 The State Bank of Indore was up-graded to class 'A' category bank. the Bank's corporate objectives are. 1960 The Bank of Indore became a subsidiary of State Bank of India w. Corporate Objectives: State Bank of Indore has been able to make its mark in all facets of banking operations. 1965 The State Bank of Indore acquired Dewas Senior Bank.  To continue to be the premier Bank of Madhya Pradesh with a national perspective. 1st January 1960 and was renamed as State Bank of Indore. History:      1920 The Bank of Indore was incorporated under a special charter from Maharaja Tukoji Rao Holkar III. Presently there are more than 300 Cities located as the branch of State Bank of Indore. who was the ruler from 1903 to 1927 of the the former princely state of Indore. 1962 The State Bank of Indore acquired the Bank of Dewas. which had been incorporated in 1941. In Mar. granted it certain concessions.

Efficient financial leverage. I t brought with it a greater Diversification of activities and the use of new working methods in order to make savings in efficiency in the light of increasing competition.Value Added Services  Payment of Utility Bills at Online network of SBI.  Railway reservation service using SBI accounts. 4. Growth and diversification. Review of earlier literature: The financial reports and data available for the two banks by various rating agencies as well as published reports by the agencies for understanding the impact of the merger on shareholders earnings is under review. but an alternative to growth by internal or organic investment. This focus needs to be laid down on the identification of the fact that whether these mergers and acquisitions improve the position and performance of banks or not. In the early 1990s mergers primarily took place at the national level. Mainly the available literature deals with the present scenario and the performance of the banks and their individual performance and projected outcomes standalone. 2. Synergism. only Reaching the southern European countries more recently. Knowledge sharing. Benefits of Merger: 1.  Online payment facility for retail users and corporate taxes. Rationale: Today financial service sector is currently undergoing a period of major restructuring. as companies strive to achieve competitive advantage over other national or European rivals’ mergers and acquisitions are a means of corporate expansion and growth. Complementary internal fund flow. 3. Here we are looking for their joint performance post merger which a exercise of looking in to the future. 5.  Fund Management an advisory services Mutual Funds investments handled with SBI accounts. 7 . They are not only means of corporate growth. It is clear that the global restructuring of the economy and resulting increasing competitive pressures are among the causative factors for the current merger mania in the financial services sector.  International Money Transfer. which started in Northern Europe in early 1990s and slowly moved southwards.

8 .6. 7. journals till date and primary and other sources if applicable and required are being considered. websites. H01: There is a significant increase in the share holders earnings post merger of the State Bank of Indore with State Bank of India. 10.(State Bank of Indore with State Bank of India)  To analyze the performance of banks before merger and after merger. Research Methodology: The methodology or course of action to be adopted to fulfill the objective is Exploratory Research.  To understand the impact on market share of the bank post merger. 8. 9. Sharing of market dynamics. Objectives of the study: Following are the trust areas of study: To make analysis of the merger of Banks. The data is mainly collected from secondary sources like Published reports. Hypothesis: The hypothesis which are being tested is as follows. Asset class increase and diversification. Tax and strategic advantage.Reduction in marketing cost.  To measure the impact on shareholders earning. Various tools of management accounting as well as quantitative and value analysis as per the requirement and applicability for analysis purpose are going to be adapted. H02: There is a significant increase in the market share of the bank post merger of the State Bank of Indore with State Bank of India. Introduction and adaption of new technology.

3. RISKS ASSOCIATED WITH MERGER. MERGER AND INDIAN BANKING SECTOR. REGULATORY FRAMEWORK MERGER/AMALGAMATION UNDER VARIOUS ACTS. 7. CONCLUSION. 5.Chapter Summary: 1. 6. FUTURE SCENARIO OF INDIAN BANKING SECTOR. 8. NEED OF THE STUDY. CHALLENGES AND OPPORTUNITIES IN THE INDIAN BANKING SECTOR. 2. 4. PRESENT STATUS OF EARLIER MERGERS. 9 .

Business Today. C. Prahlad on Mergers and Amalgamation and Indian PSU.K. Financial Times. Financial Express. 2.sbindore. www. Dr. www.P. 5. Books: Mergers and Acquit ion by H. 3. www. SB Indore. Facts for You.wikipedia. Research Publication on Mergers and Acquit ion by H.Business India. Journals. Lakhotia.org. Economic Times. Business Week.economictimes. 7.Bibliography / webliography : 1.P. 4. Ranina. Ramaiya. Indian Banker. Financial Reports: SBI. The Hindu News Dailies. Business magazines.com www. www.sbi.. 6.org. Ranina. Banking and Finance.com 10 .answers. Taxmann.com. Journals: Banking and Insurance.

Sign up to vote on this title
UsefulNot useful