DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

NYAYAPRASTHA, SABBAVARAM, VISAKHAPATNAM - 531035

ANDHRA PRADESH, INDIA

TITLE OF THE RESEARCH PAPER

Law relating to amalgamation of banking companies

By

Name of the Student: SHAIK J RAHAMAN

Roll No.: 2017083

Semester: 6th

Name of the Program: 5 year (B.A., LL.B. / LL.M.)

Name of the Faculty Member: P.Bayola Kiran, Assistant Professor

Date of Submission: 12-12-2020

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 TABLE OF CONTENTS

1. Acknowledgement……….. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

2. SYNOPSIS……………………………………………………………………………….4

3. Introduction……… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

4. REVIEW ON GROWTH OF MERGER AND AMALGAMATION………………..8

5. OTHER ASPECTS OF MERGERS AND AMALGAMATIONS. . . . . . . . . . . . . . . .
14
6. LIST OF MERGER AND AMALGAMATIONIN INDIAN BANKING
COMPANIES. . . . . . . . . . . . . . . . . . . . . . . . ……………………………………….. . .17

7. Conclusion……. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

8. References………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

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 ACKNOWLEDGEMENT

“I would sincerely like to put forward my heartfelt appreciation to our respected Labour
law professor, P.Bayola Kiran, Assistant Professor Sir for giving me this golden opportunity
to take up this project regarding Law relating to amalgamation of banking companies. I have
tried my best to collect information about the project in various possible ways to depict clear
picture about the given project topic.”

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 SYNOPSIS

Literature Review:

1. Saahil Sakordekar, “What are the various Steps Involved in case of Amalgamation of
two Banks”.1

This article talks about the Amalgamation occurs when two companies combine to form a new
entity. It is more likely that the two amalgamating companies are engaged in the same line of
business. In the present scenario, the two companies will be banking companies. Amalgamation
includes combining the assets and liabilities of the two banking amalgamating companies into
one amalgamated company while also swapping shares based on their market value.

2. Saisreenadh, “Case Laws Related To Mergers And Acquisitions Of Banking

Companies”2

This article deals with Mergers and Acquisitions (M&A) play an important role in management
of company's establishment. The companies Act, 2013 consists to all these provisions related to
M & A. Let us look at few case laws related to few mergers & acquisitions with respect to
banking companies.

3. Indrani Patwari “Bank Mergers and Acquisitions: A Comparative Analysis of the

Banking Regulation Act, 1949 with the Companies Act, 2013”3

This article deals with the study the laws and procedures of bank mergers in India. A large
number of international and domestic banks all over the world are engaged in merger and
acquisition activities. There is diversity of the governing statutes applicable to different entities
in the Indian financial system. The laws governing bank mergers are spread across mainly in the

1
https://blog.ipleaders.in/steps-involved-amalgamation-two-banks/
2
http://www.legalserviceindia.com/legal/article-2827-case-laws-related-to-mergers-and-acquisitions-of-banking-
companies.html

3
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2998223

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Banking Regulation (BR) Act, 1949, Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 and 1980 and State Bank of India Act, 1955. This paper also attempts
to analyse the role of Reserve Bank of India (RBI) in bank mergers and elaborate on the
guidelines provided by RBI. The paper attempts to substantiate the provisions of the BR Act by
using various judicial pronouncements.

Scope of the project:

The scope of the paper is limited to Indian Banking Companies.

Research Methodology:

“This project is purely doctrinal type and both on primary and secondary sources are taken such
as websites, books, journals and internet sources. The type of study done here is Descriptive and
exploratory. The referencing style followed. This Research process deals with collecting and
analysing information to answer questions. The Research is purely descriptive in its boundaries
of the topic."

Research question:

1. What are the various Steps Involved in case of Amalgamation of two Banks?

2. What are the benefits by amalgamation?

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INTRODUCTION

“The word "merger" or "amalgamation" means, according to the Oxford Dictionary, "combining
two commercial companies into one and "merging two or more business concerns into one"
respectively. Merger is a merger between two or more companies, which loses the identity of
one or more enterprises and results in a new company, whereas 'Amalgamation' involves
combining two or more existing enterprises into one enterprise, losing their identity and creating
a different legal identity for the mixed enterprises. Mergers are often often confused with the
acquisition of a word. Acquisition, however is a common term used to describe a transfer of
ownership, while merger is a technical term used for a specific legal process in which two
distinct entities combine and only one legal entity survives the merger. Therefore, strictly
speaking, the acquisition would also require mergers. 4 In financial terms, Merger is limited to a
situation in which the companies' assets and liabilities are invested in another company, the
combined company loses its name and its shareholders become the other company's
shareholders. In the other hand, amalgamation is an agreement under which two or more
companies' assets and liabilities become vested in another corporation (which may or may not be
one of the original companies) and which will include all the owners of the amalgamating
companies as its shareholders.

In the globalized economy,5 Merger and Amalgamation acts as an important tool for the growth
and expansion of the economy. The main motive behind the Merger and Amalgamations to
create synergy, that is one plus one is more than two and this rationale beguiles the companies
for merger at the tough times. Merger and Amalgamation help the companies in getting the
benefits of greater market share and cost efficiency. Companies are confronted with the facts
that the only big players can survive as there is a cut throat competition in the market and the
success of the merger depends on how well the two companies integrate themselves in carrying
out day to day operations.

One size does not fit for all, therefore many companies finds the best way to go ahead like to
expand ownership precincts through Merger and Amalgamation. Merger creates synergy and
economies of scale. For expanding the operations and cutting costs, Business entrepreneur and
4
https://www.hugedomains.com/domain_profile.cfm?d=legalsutra&e=com
5
http://www.socialresearchfoundation.com/upoadreserchpapers/2/54/1509031210201st%20khurshid%20ali.pdf?
cv=1

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Banking Sector are using Merger and Amalgamation worldwide as a strategy for achieving
larger size, increased market share, faster growth, and synergy for becoming more competitive
through economies of scale. A merger is a combination of two or more companies into one
company or it may be in the form of one or more companies being merged into existing
companies or a new company may be formed to merge two or more existing companies. On the
other hand, when one company takes over another company and clearly well-known itself as the
new owner, this is called Acquisition. The companies must follow legal procedure of Merger
and Amalgamation which has given by RBI, SEBI, Companies’ Act 1956 and Banking
Regulation Act 1949.

Growth is always the priority of all companies and confers serious concern to expand the
business activities. Companies go for Merger and Amalgamation for achieving higher profit and
expanding market share. Merger and Amalgamations the need of business enterprises for
achieving the economies of scale, growth, diversification, synergy, financial planning,
Globalization of economy, and monopolistic approach also creates interest amongst companies
for Merger and Amalgamation in order to increase the market power. Merger and Amalgamation
is not a single day process, it takes time and decisions are to be taken after examining all the
aspects. Indian companies were having stringent control before economic liberalization;
therefore they led to the messy growth of the Indian corporate sector during that period. The
government initiated the reform after 1991 and which resulted in the adaptation of different
growth and expansion strategies by the companies.

The Banking system of India was started in 1770 and the first Bank was the Indian Bank known
as the Bank of Hindustan. Later on some more banks like the Bank of Bombay-1840, the Bank
of Madras-1843 and the Bank of Calcutta-1840 were established under the charter of British
East India Company. These Banks were merged in 1921 and took the form of a new bank known
as the Imperial Bank of India. For the development of banking facilities in the rural areas the
Imperial Bank of India partially nationalized on 1 July 1955, and named as the State Bank of

India along with its 8 associate banks (at present 7). Later on, the State Bank of Bikaner and the

State Bank of Jaipur merged and formed the State Bank of Bikaner and Jaipur.

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The Indian banking sector can be divided into two eras, the pre liberalization era and the post
liberalization era. In pre liberalization era government of India nationalized 14 Banks on 19 July
1969 and later on 6 more commercial Banks were nationalized on 15 April 1980. In the year
1993 government merged The New Bank of India and The Punjab National Bank and this was
the only merger between nationalized Banks, after that the numbers of nationalized Banks
reduced from 20 to 19. In post liberalization regime, government had initiated the policy of
liberalization and licenses were issued to the private banks which lead to the growth of Indian
Banking sector.

The Indian Banking Industry shows a sign of improvement in performance and efficiency after
the global crisis in 2008-09. The Indian Banking Industry is having far better position than it was
at the time of crisis. Government has taken various initiatives to strengthen the financial system.
The economic recovery gained strength on the back of a variety of monetary policy initiatives
taken by the Reserve Bank of India.

Recently, on 13th August 2010, the process of Merger and Amalgamation in the Indian banking
sector passes through the Bank of Rajasthan and the ICICI Bank. Moreover, the HDFC Bank
acquired the Centurion Bank of Punjab on 23 May 2008. The Reserve Bank of India sanctions
the scheme of mergers of the ICICI Bank and the Bank of Rajasthan. After the merger the ICICI
Bank replaced many banks to occupy the second position after the State Bank of India (SBI) in
terms of assets in the Indian Banking Sector. In the last ten years, the ICICI Bank, the HDFC
bank in the private sector, the Bank of Baroda (BOB) and the Oriental Bank of Commerce
(OBC) in the public sector involved themselves as a bidder Banks in the Merger and
Amalgamation in the Indian Banking.”

REVIEW ON GROWTH OF MERGER AND AMALGAMATION

“Merger and Amalgamation has high lightened the impact of Merger and Amalgamation on
different aspects of the companies. A firm can achieve growth both internally and externally.
Internal growth may be achieved by expanding its operation or by establishing new units, and
external growth may be in the form of Merger and Amalgamation, Takeover, Joint venture,
Amalgamation etc. The various reasons for Merger and Amalgamation to take place, Just to look

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the effects of Merger and Amalgamation on Indian financial services sector. After the period of
few years of Merger and Amalgamation it came to the point that companies may have been able
to leverage the synergies arising out of the merger and Acquisition that have not been able to
manage their liquidity. The comparison of pre and post analysis of the firms. It also indicated the
positive effects on the basis of some financial parameter like Earnings before Interest and Tax
(EBIT), Return on shareholder funds, Profit margin, Interest Coverage, Current Ratio and Cost
Efficiency etc. On Indian banking industry and highlighted the changes occurred in the banking
sector after post liberalization and defined the Merger and Amalgamation as per AS-14. It also
gave the idea of changes that occurred after Merger and Amalgamation in the banking sector in
terms of financial, human resource & legal aspects. It also described the benefits come out
through Merger and Amalgamation and examined that Merger and Amalgamation is a strategic
tools for expanding their horizon and companies like the ICICI Bank has used merger as their
expansion strategy in rural market to improve customers base and market share. The sample of
17 Merger of post liberalization and discussed about communication in Merger and
Amalgamation, the study lightened the role of media in Merger and Amalgamation. The
strategic and financial similarities of merged Banks, and relevant financial variables of
respective Banks were considered to assess their relatedness. The result found that only private
sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public
sector Bank are reluctant toward their type of restructuring. Target Banks are more leverage
(dissimilarity) than bidder Banks, so the merger lead to attain optimum capital Structure for
them bidders and asset quality of target firms is very poor except the cases of the HDFC Vs the
CBOP merger in 2007. The factor behind voluntary amalgamation are synergies, efficiency, cost
saving, economies of scale. The merging partners strategically similarities and relatedness are
very important in the synergy creation because the relatedness of the strategic variable have a
significant impact on the Bank performance and the effect of merger on the stock market. The
impact of the stock market bubble on merger and amalgamation, followed by the reduction of
the pre-bubble and subsequent bursting of the bubble, seems to have led investors to become
more aware and provide evidence indicating that investors took more risk during the euphoric
bubble era. The major force of change in the Indian banking sector is the convergence of banks
by consolidation.

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The valuation practices and the adequacy of the swap ratio are based on voluntary amalgamation
in the Indian banking sector and the swap ratio is used to valuate the banks, but in most cases the
final swap ratio is not justified in relation to the financials of the banks. The relationship
between the credibility of banks after Merger and Amalgamation and their effects on the assets
of shareholders. 285 The European merger and acquisition deal revealed between 1997 and 2002
finds that Merger and Amalgamation did not have a substantial impact on average wealth. It is
found that Merger activities in India were experienced by the banking sector when banks faced
the problem of losing old customers and were unable to attract new customers. It described that
the acquiring companies primarily concentrate on economies of scale, gaining productivity and
resolving the need for connectivity and employee concern, and described how the technical and
joint integration committee managed the integration process. Road map is prepared and HR
integration is conducted as per schedule and they took a case of the Lord Krishna Bank acquired
by the Bank of Punjab and later on the HDFC Bank acquired by the Centurion Bank of Punjab
and gave the integration structure. Through an interview conducted in a recent bank merger, in-
depth interviews conducted in a recent fusion of an Indian Bank, this contact, HR integration,
management action and consequent contribution to post-merger performance. Proactive
communication, improvements in organisational structure, were inferred, and appropriate human
resource integration would smoothen the journey towards successful integration.

The effect on a shareholder bank of the merger notifications of five banks in the Indian Banking
Sector. These mergers included the merger of Times Bank with HDFC Bank, Madurai Bank
with ICICI Bank, ICICI Ltd with ICICI Bank, the merger of Global Trust Bank with Oriental
Bank of Commerce, and the merger of Bank of Punjab with Centurion Bank. The announcement
of the Bank's merger had a positive and important effect on the assets of the shareholders. The
result showed that the agreement with the European and US Banks Merger and Amalgamation
except for the fact that the value of the shareholder of the bidder banks was destroyed in the US
sense, the market value of the combined bank portfolio's weighted capital adequacy ratio as a
result of the merger announcement was 4.29 percent in a three-day period. The positive impact
of merger on the bidder Banks evaluated the employment effects of Merger and Amalgamation
on target by using match establishment level data from Finland over the period of 1989-2003.
The cross border Merger and Amalgamation as well as domestic Merger and Amalgamation and
analyzed the effect of employment of several different types of Merger and Amalgamation. The

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evaluation of the cross border Merger and Amalgamation lead to downsizing the manufacturing
employment and the effects of cross border Merger and Amalgamation on employment in non-
manufacturing are much weaker and change in ownership associated with domestic Merger and
Amalgamation and internally restructuring also typically causes employment losses. The effects
of cross border Merger and Amalgamation the impact of cross border Merger and Amalgamation
and analyzed the role of trade cost, and explained the increased in the number of cross border
Merger and Amalgamation and used industry data of 23 countries over a period of 1990 -2001.
The result suggested that aggregate trade cost affects cross border merger activity negatively, its
impact differ importantly across horizontal and non-horizontal mergers. The indication of the
less negative effects on horizontal merger, which is consistent with the tariff jumping agreement,
put forward in literature on the determinant of horizontal FDI.

The impact of merger on the operating performance of acquiring firms in different industries by
using pre and post financial ratio to examine the effect of merger on firms. They selected all
mergers involved in public limited and traded companies in India between 1991 and 2003, result
suggested that there were little variation in terms of impact as operating performance after
mergers. In different industries in India particularly banking and finance industry had a slightly
positive impact of profitability on pharmaceutical, textiles and electrical equipment sector and
showed the marginal negative impact on operative performance. Some of the industries had a
significant decline both in terms of profitability and return on investment and assets after
merger.

The various motives for Merger and Amalgamation, there were multiple reasons for Merger and
Amalgamation in the Indian Banking Sector and still contains to capture the interest of a
research and it simply because of after the strict control regulations had led to a wave of merger
and Amalgamation in the Banking industry and states many reason for merger in the Indian
Banking sector. While a fragmented Indian banking structure may be very well beneficial to the
customer because of competition in banks, but at the same time not to the level of global
Banking Industry, and concluded that merger and Amalgamation is an imperative for the state to
create few large Banks. The synergy is one of the main factor behind the merger and took 56
mergers from US industry, and the cash flows improvement in the productive usage of assets
and increasing the sales and showed the surviving firm improvement in operating cash flows.

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The post-merger create additional value and shows the improvement of bidder firm with price to
book ratio, used non-parametric test as most suitable method of testing post-merger
performance, financial implications and problem occurring in Merger and Amalgamation
highlighted the cases for consolidation and discussed the synergy based merger which
emphasized that merger is for making large size of the firm but no guarantee to maximize
profitability on a sustained business and there is always the risk of improving performance after
merger.”

STAMP DUTY CONSIDERATIONS OF AMALGAMATION

“Section 2(g)(iv) of the Bombay Stamp Act, 1958 describes 'conveyance' to cover any order
made by the High Court pursuant to section 394 of the Companies Act, 1956 concerning the
amalgamation of companies by which any other individual is transferred to or vested in, land,
whether movable or immovable, or any estate or interest in any property. In consequence,
therefore the stamp duty is payable on the market value of the properties, whether movable or
immovable, of the amalgamating company transferred to the amalgamated company or of the
vests transferred to the amalgamated company, even if by order of the Court, the amalgamation
scheme is approved.6

This very harsh provision will act as a disincentive for merger schemes, particularly in the case
of a reverse merger, where the market value of a healthy company's assets could be very high,
requiring a heavy stamp duty tax, which may amount to 10% of the market value. In certain
instances, stamp duty can surpass the book value of the company's assets.

The Bombay High Court recently held, in Li Taka Pharmaceuticals Ltd. and another v. State of
Maharashtra and others, that the stamp duty is payable on the amalgamation of companies
pursuant to the Bombay Stamp Act of 1958 and that the order of the High Court adopted
pursuant to section 394 of the Companies Act of 1956 is an instrument as specified in section
2(1) of the Bombay Stamp Act and consequently the order of the Bombay Stamp Act of 1956.

In the above decision, the High Court of Bombay also upheld the constitutional validity of the
provisions of the Bombay Stamp Act, 1958 and the amendments made afterwards in order to
ensure that the word 'conveyance' covers any decree or final order of any court.

6
https://www.hugedomains.com/domain_profile.cfm?d=legalsutra&e=com

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The imposition of stamp duty would seem quite strange and peculiar by treating an order of the
High Court as any conveyance and/or as an instrument, but the petitioners' plea that the levy of
stamp duty on the order of the court on amalgamation or compromise decree would result in
unexpected results having been rejected by the High Court, those who thought that the
judgments and orders of the courts included stamp duty which might not have been anticipated
and provided for7. The court in this case seems to have followed the judgment of the Hon’ble
Supreme Court in  Purshottam H. Judye and Others v. V.B. Potdar and another89 which puts
forth the proposition that the meaning of the expression ‘instrument’ should be construed having
regard to the context in which the expression is used. An award, which frames the schemes for
payment of gratuity, would constitute an instrument. The Hon’ble Court held, “Having regard to
the object which the legislature had in mind in widening the scope of definition, we think it
would not be unreasonable to hold that the word instrument has a wider denotation in the context
and cannot be confined only to documents executed as between the parties….. The word
‘instrument’ would include awards made by industrial courts of competent jurisdiction”. Since
the term ‘instrument’ is not defined in the General Clauses Act, one has to be guided by the
meaning of the expression in the light of the above judgment of the Supreme Court having
regard to the context in which the expression is used in the Act. The judgment also will have
effect on the limitation of the decree. The fact that the decree of a civil court is statutorily
required to be stamped under the Bombay Stamp Act is recognized by the courts and the
limitation begins to run not from the date of direction being given to pass a final decree but from
the date on which the final decree is drawn up and engrossed on stamp paper(s) supplied by the
parties concerned10. However, it is submitted that since amalgamation is not a transfer or
conveyance of property by one company to another, it would be incongruous to treat an
amalgamation as a case of deemed transfer, especially, when there is no deeming provision
7
H.R. Saviprasad op. cit.
8
AIR 1966 SC 856.

9
Ibid
10
S.B. Lokhande v. C.S. Lokhande and another, AIR 1995 SC 1211. The Hon’ble court held that, “Limitation does
not begin to run from the date when direction is given to pass final decree.  Mere giving of direction to supply
stamped paper for passing final decree does not amount to passing a final decree.  Until the final decree determining
the rights of the parties by metes and bounds is drawn up and engrossed on stamped paper(s) supplied by the parties,
there is no executable decree.”

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enacted for the purpose.  Exemption from stamp duty in cases of amalgamation of companies is,
therefore, essential.

OTHER ASPECTS OF MERGERS AND AMALGAMATIONS

This section discusses some of the other aspects, from a tax point of view, of mergers and
amalgamations that have not previously been discussed. The primary focus of the section is on
other tax benefits provided to companies participating in mergers that are not granted under the
main clause, such as section 72-A. It should be noted that the chapter deals with some unusual of
the exemptions and does not intend to be exhaustive in nature. Also, much reliance has been laid
on the judicial decisions and the statutory interpretation than the commentaries on the subject.11

CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH

The question of exemption under many heads of revenue and properties occurs in the
amalgamation of companies. One of the heads so frequently mentioned is that of the
amalgamating company's capital expenditure. Section 35 has been implemented in this regard,
and many changes have been made, mostly reflecting industrial policy. However the Act creates
two exceptions in this respect, where the clauses referred to in points (ii and iii) of Article 35(2)
have been removed from the application of such a deduction in the case of amalgamation.12

DEPRECIATION

Under the proviso to section 32, depreciation in respect of buildings, machinery, plant or
furniture, being tangible assets or know-how, patents, copyrights, trademarks, licenses,
franchises or any other business or commercial right of similar nature being intangible assets,
shall be available to the amalgamated company. However, the Finance (No. 2) Act, 1996 has
inserted a proviso to section 3213 whereby the total depreciation allowable to the amalgamating
company and the amalgamated company cannot exceed the normal depreciation allowable under
the Act if the amalgamation had not taken place. The deduction shall be appointed between the

11
https://www.hugedomains.com/domain_profile.cfm?d=legalsutra&e=com
12
Ibid
13
Proviso no. 5 to section 32 of the Act provides for the provisions regarding depreciation in case of amalgamation.
This also went through certain changes by virtue of the Finance Act of 1999.

14
amalgamating company and the amalgamated company in the ratio of the number of days for
which the assets were used by them.14

BAD DEBTS

At CIT v. T. It was concluded that Veerabhadra Rao K. Koteswara Rao & Co. could demand the
deduction of bad debts for debtors taken over from the predecessor by a successor to the
company. The amalgamated business would then be able to claim bad debts if it were taken over
by any of the debtors, they're bad, or they're becoming bad. Section 41(4) provides for the
taxation of the amount recovered in respect of the already claimed and approved bad debts. In
the case of CIT v. P.K., however it was pointed out by the High Court of Madras. Kaimal argues
that the section postulates that the person alleging bad debts should be recovered by the same
entity. Accordingly, if the bad debts which are subsequently recovered by the amalgamated
company are incurred by the amalgamating company, the same will not be liable for tax as
provided for in section 411 (4).15

EXPENSES OF AMALGAMATION

Sub-section (5) of section 35D states that in the case of amalgamation, the regulations relating to
the amalgamation of the preliminary costs referred to in section 35D would apply to the
amalgamated company, as they would apply to the amalgamated company as though the
amalgamation had not taken place and as such, the amalgamated company would have the right
to subtract the balance amount from the amalgamated company. By providing for a new sub-
section, i.e. section 35 D, the Finance Act, 1999 expanded the amortisation of preliminary costs
even to demerger (5A). However with regard to only preliminary expenses, these amortisations
are only as provided for in section 35 D (1). In the case of CIT v. Bombay Dyeing & M/g Co.
with respect to expenditure for amalgamation or demerger, Ltd. The Supreme Court held that as
the business of the amalgamating company and the amalgamated company are complementary
and as the expenditure was set out entirely and exclusively for the purpose of business, the legal
expenses of amalgamation are revenue expenses. Under Section 35DD of the Act, the value of

14
Supra Note 1
15
https://www.hugedomains.com/domain_profile.cfm?d=legalsutra&e=com

15
the amortisation of costs incurred for the purposes of the amalgamation of the demerger of an
undertaking is bestowed on the amalgamated or demerged undertaking.16”

LIST OF MERGER AND AMALGAMATIONIN INDIAN BANKING COMPANIES

1 Bank of Bihar Ltd. State Bank of India November 8, 1969

2 National Bank of Lahore Ltd. State Bank of India February 20, 1970

3 Miraj State Bank Ltd. Union Bank of India July 29, 1985

4 Lakshmi Commercial Bank Ltd. Canara Bank August 24, 1985

5 Bank of Cochin Ltd. State Bank of India August 26, 1985

6 Hindustan Commercial Bank Ltd. Punjab National Bank December 19, 1986

7 Traders Bank Ltd. Bank of Baroda May 13, 1988

8 United Industrial Bank Ltd. Allahabad Bank October 31, 1989

9 Bank of Tamilnadu Ltd. Indian Overseas Bank February 20, 1990

10 Bank of Thanjavur Ltd. Indian Bank February 20, 1990

11 Parur Central Bank Ltd. Bank of India February 20, 1990

12 Purbanchal Bank Ltd. Central Bank of India August 29, 1990

13 New Bank of India Punjab National Bank September 4, 1993

14 Bank of karad Ltd Bank of India 1993-1994

15 Kashi Nath Seth Bank Ltd. State Bank of India January 1, 1996

16 Bari Doab Bank Ltd Oriental Bank of Commerce April 8, 1997

17 Punjab Co-operative Bank Ltd. Oriental Bank of Commerce April 8, 1997

16
H.R. Saviprasad, “Tax implications of amalgamations-beyond section 72-A”, Taxman 140, Vol. 112.

16
18 Bareilly Corporation Bank Ltd Bank of Baroda June 3, 1999

19 Sikkim Bank Ltd Union Bank of India December 22, 1999

20 Times Bank Ltd. HDFC Bank Ltd February 26, 2000

21 Bank of Madura Ltd. ICICI Bank Ltd. March 10, 2001

22 ICICI Ltd ICICI Bank Ltd May 3, 2002

23 Benares State Bank Ltd Bank of Baroda June 20, 2002

24 Nedungadi Bank Ltd. Punjab National Bank February 1, 2003

25 South Gujarat Local Area Bank Ltd. Bank of Baroda June 25, 2004

26 Global Trust Bank Ltd. Oriental Bank of Commerce August 14, 2004

27 IDBI Bank Ltd. IDBI Ltd April 2, 2005

28 Bank of Punjab Ltd. Centurion Bank Ltd October 1, 2005

29 Ganesh Bank of Kurundwad Ltd Federal Bank Ltd September 2, 2006

30 United Western Bank Ltd. IDBI Ltd. October 3, 2006

31 Bharat Overseas Bank Ltd. Indian Overseas Bank March 31, 2007

32 Sangli Bank Ltd. ICICI Bank Ltd. April 19, 2007

33 Lord Krishna Bank Ltd. Centurion Bank of Punjab Ltd. August 29, 2007

34 Centurion Bank of Punjab Ltd. HDFC Bank Ltd. May 23, 2008

35 The Bank of Rajasthan ICICI Bank Ltd August 13, 2010

36. Andhra Bank and Corporation Bank will get amalgamated into Union Bank on April 1st

2020, making it the fifth largest public sector bank in the country.

RESEARCH GAP

17
“The works have been done on trends, policies & their framework, human aspect which is
needed to be investigated, whereas profitability and financial analysis of the mergers have not
given due importance. This would go to investigate the detail of Merger and Amalgamation with
greater focus on the Indian banking sector in post liberalization regime. The pre and the post-
merger performance of banks. An attempt is made to predict the future of the ongoing Merger
and Amalgamation on the basis of financial performance and focusing mainly of Indian banking
sector.

ANALYSIS AND INTERPRETATIONS

First the merger between the PNB and the Nedungadi bank on 1 Feb. 2003, second, the merger
between the CBOP and the HDFC bank Ltd. on 23 May 2008, examining both cases as
considered by the public and private sector banks, respectively. To evaluate banks' financial
results after Merger and Amalgamation. Gross profit margin, net profit margin, operating profit
margin, return on capital employed, return on equity, and debt equity ratio have been measured
for the financial and accounting ratio. In the first example, the profile of both banks prior to the
merger was indicated in Table 3. Table 4 displays the bidder bank's post-performance after the
merger. Table 5, shows the combined performance of both banks prior to merger. Similarly, in
second case, Table 6 depicts the profile of both the banks before merger, Table 7 indicates the
performance of acquiring bank after merger and Table 8 shows combined financial performance
of both the banks before merger. In both the cases all financial and accounting ratios have
computed by the researcher’s.

In the first example, the merger of Nedungadi Bank with Punjab National Bank was seen and
then on the basis of main ratios, the financial performance of the Pre & Post merger was
compared. The mean gross profit margin and t-value of 1.125 have not been found to vary. The
mean value of the gross profit margin is shown to have decreased, but it is seen not to have an
impact on the merger, so it is not seen to be significant, but the net profit margin has been
statistically extremely significant, with a mean value and a t-value of -8,683. After the merger,
the average net profit margin increased so that the bank's performance improved in post-merger,
similarly the average value of the operating profit margin shows a substantial decrease in the
average and t-value 2.737, suggesting that it has no impact after merger and is not significant
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statically, result also shows. the mean difference on return on capital employed and t-value
-5.671 which is conformed significant statically, this shows the return on capital employed has
increase after the merger and bank has shown positive impact of merger on investment, the mean
value of return on equity of bank has been increased after merger and indicated that bank give
more return on equity after merger to the equity shareholders and the mean value of return on
equity and t-value -8.934 and shows significance, while lastly debt equity ratio shows
significance with mean value and t-value -3.196. Therefore this indicates that the debt equity
ratio also improved after merger so it directly increased the performance of the banks, and
majority of financial parameter indicate that bank performance has improved after merger.

CONCLUSION

Merger and Acquisition is the useful tool for growth and expansion in the Indian banking sector.
It is helpful for survival of weak banks by merging into larger bank. This study demonstrates the
effect of Merger and Amalgamation in the Indian banking sector and two cases were taken as a
sample by the researcher for the study and investigated whether or not the merger led to a
successful situation. For this a comparison in terms of gross profit margin, net profit margin,
operating profit margin, return on capital employed, return on equity, and debt equity ratio
between pre-and post-merger results. The combined performance of the merger of both banks
(three years earlier) and the performance of the acquisition of the bank (three years later) were
contrasted. In case the merger of Nedungadi bank and PNB net profitability, return on capital
employed, return on equity and debt equity ratio and case II the return on equity, debt equity
ratio and gross profit margin has shown the improvement after the merger, and for the purpose
and objective of the study investigator apply independent t-test for analyzing the pre and post-
merger performance of the banks. And results suggest that after the merger the efficiency and
performance of banks have increased. The most important is that to generate higher net profits
after the merger in order to justify the decision of merger undertaken by the management to the
shareholders. Researcher suggests, for future research in this area could be the study of impact of
merger only on acquiring banks by comparing pre and post-merger performance and take more

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banks to a larger sample concerning a longer time period for the study which would have given
better result.”

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