times merger

Topics: Bank, Financial ratios, Mergers and acquisitions Pages: 10 (3779 words) Published: October 5, 2014
IRJC
International Journal of Marketing, Financial Services & Management Research Vol.1 Issue 9, September 2012, ISSN 2277 3622

MERGERS IN INDIAN BANKS: A STUDY ON MERGERS OF HDFC
BANK LTD AND CENTURION BANK OF PUNJAB LTD.
DEVARAJAPPA S.*
*Assistant Professor in Commerce,
University College of Arts,
Tumkur University.

ABSTRACT
The purpose of the present paper is to explore various motives of merger in Indian banking industry. This includes various aspects of bank mergers. It also compares pre and post merger financial performance of merged banks with the helps of financial parameters like, Gross Profit margin, Net Profit margin, operating Profit margin, Return on Capital Employed, Return on Equity, and Debt Equity Ratio. Through literature Review it comes know that most of the work done high lightened the impact of merger and Acquisition on different companies. The data of Merger and Accusations since economic liberalization are collected for a set of various financial parameters. Independent T-test used for testing the statistical significance and this test is applied not only for ratio analysis but also effect of merger on the performance of banks. This performance being tested on the basis of two grounds i.e. , Pre-merger and Post- merger. Finally the study indicates that the banks have been positively affected by the event of merger. KEYWORDS: Mergers & Acquisition, Banking, Financial Parameters, Profitability, Indian Banks.

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Merger of two weaker banks or merger of one health Bank with one weak bank can be treated as the faster and less costly way to improve profitability then spurring internal growth (Franz, H. Khan 2007).The main motive behind the merger and acquisition in the banking industry is to achieve economies of scale and scope. Mergers also help in the diversification of the products, which help to reduce the risk.

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Bank in general terminology is referred to as an financial institute or a corporation which is authorized by the state or central government to deal with money by accepting deposits, giving out loan and investing in securities. The main roles of Banks are Economics growth, Expansion of the economy and provide funds for investment. In the resent times banking sector has been undergoing a lot of changes in terms of regulation and effects of globalization. These changes have affected this sector both structurally and strategically. With the changing Environment many different strategies have been adopted by this sector to remain efficient and to surge ahead in the global arena. One such strategy is through the process of consolidation of banks emerged as one of the most profitable strategy. There are several ways to consolidate the banking industry; the most commonly adopted by banks is merger.

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INTRODUCTION

IRJC
International Journal of Marketing, Financial Services & Management Research Vol.1 Issue 9, September 2012, ISSN 2277 3622

The Indian banking sector can be divided into two eras, the liberalization era and the post liberalization era. In the pre liberalization era government of India nationalized 14 banks as 19July 1965 and later on 6 more commercial Banks were nationalized as 15 April 1980. In the year 1993 government merged the new banks of India and Punjab National banks and this was the only merged between nationalized Banks after that the number of Nationalized Banks reduces from 20 to 19.In the 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 efficiently after the global crises in 2008-2009. In the Indian banking industry having far better position than it was at the time of crises. Government has taken various initiatives to strengthen the...
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