Value creation through mergers and acquisition in the Indian banking sector Banks and banking Economic aspects

Abstract

In the current economic scenario of ongoing globalization of the Indian Financial Markets, changing consumer demographics and expectations, constant need for increased margins, the advent of Basel III and the adaptation to it over the next few years and finally the emergence of the concept of Universal Banking, Consolidation and Restructuring in the form of Mergers and Acquisitions have become a widely used strategy by banks to maintain, strengthen and evolve in the market. India is becoming a global economy. This calls for every industry in the economy to mandatorily reach global standards and scale to survive and prosper. This also means that there is a need to make sure that the Indian Banking Sector not only grows in size to meet the fast growing global economy, with access to capital, but also ensure that the Banks become more robust with stronger risk management capabilities and widened geographical reach. With constant challenges and change in the economy, whether in the form of economic turbulence, recession, BASEL norms, technology, changed demographics, increased competition and the like, Indian Banks will have to innovate and change else perish. They will have to do this by making suitable changes in their business strategy, rework on their current product and service portfolio keeping customers in mind, and also focus on improving their effectiveness and efficiency. With the environment being dynamic and with focus on size and scale, Indian Banks have been pushed into adapting various strategies to survive. One such strategy is consolidation, a concept that has emerged as one of the most profitable and the most commonly used strategy by banks. Various studies done on finding whether there was value creation for shareholders and companies through Mergers and Acquisitions, have found mixed results .Therefore, there is a need to study whether there is value creation for shareholders, company, and a new dimension of customers in the Indian banking sector through Mergers and Acquisitions to achieve Univers