This research paper aims to analyze the behavior of various mergers and acquisitions that have taken place in the Indian Banking sector. Several International and Domestic banks are engaged in the process of mergers and acquisitions. The principle objective to engage in this activity is to acquire the benefits of economies of scale. It is one method of ensuring that a competitive force is set up to reckon with in the International economy. Merging of the Indian banking sector through mergers and acquisitions on commercial considerations and business strategies is a vital pre-requisite. In the present times, the banking sector is a rapidly growing industry in India.

A comparatively new development in the Indian banking sector is enhanced through mergers and acquisitions. It will permit banks to achieve a world class position and throw superior value to the stakeholders. This paper will focus on the impact of merger on a company's stock and the effect on the equity share of the shareholder's capital. It will also focus on the main factors affecting the performance of the bank pre- and post-merger. The findings state that to a certain extent M&A's have been successful in Indian banking sector. The paper also studies the State Bank of India and its Associates merger with the pros and cons of the banks and the employees of the banks. The required data are collected from secondary source.

Introduction
In today's fast-growing world mergers and acquisitions is an approach used by corporations for their growth, extending their business to other dominions and to overcome financial struggle. The procedure of mergers and acquisitions has received a substantial position in today's corporate world.

It can be observed that there are various recognized laws accessible in India on numerous modes of corporate restructuring namely the Companies Act, 2013, the Securities Contract Regulation Act, 1956, the SEBI Act, 1992, the Industries (Development & Regulation) Act, 1951, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, State Bank of India Act, 1955 and the Banking Regulation Act, 1949.[1]

In the recent times, the trends of mergers and acquisitions in India have been altered. In several segments of the economy, effects of the mergers and acquisitions have been diverse. Banking is the central pillar of the economy. A main part of the banking sector in India is government-owned, though there are also private minority shareholders in some of these banks. Banks are stimulated to gain global reach and better synergy through bank mergers and also allow greater banks to obtain the stressed assets of smaller banks.

Abolition of competition between the banks is another aspect for bank mergers. By doing this considerable amount of funds used for supporting competition can be used for the growth banking business. Sometimes, a bank with a big bad debt portfolio and poor revenue will merge itself with another bank to seek backing for survival. Merger in India between unviable banks should grow quicker so that the weak banks could be reformed providing continuity of employment with the working force, operation of the assets blocked up in the unviable banks and adding beneficially to the prosperity of the nation through increased flow of funds.[2]

In the banking sector, important mergers and acquisitions in India in recent years include the merger between IDBI (Industrial Development bank of India) and its own subsidiary IDBI Bank in 2004. The deal was worth $ 174.6 million (Rs. 7.6 billion in Indian currency). Another important merger was that between Centurion Bank and Bank of Punjab in 2005.[3] Worth $82.1 million (Rs. 3.6 billion in Indian currency), this merger led to the creation of the Centurion Bank of Punjab with 235 branches indifferent regions of India, another was acquisition of Centurion Bank of Punjab by HDFC Bank in 2008.

The economic environment is full of problem for the small and medium sized banks, due to superseded technology, insufficiencies of resources, faltering marketing efforts and weak financial structure. Their existence becomes a question of doubt without new techniques and innovations and they have a threat from the larger banks. Their restructuring through merger could offer a relief and help them to revive.

So far bank mergers have provided a protection to weak banks from closing down and failure. Smaller banks fearing aggressive acquisition by a large bank sometimes enter into a merger to increase their market share and protect themselves from the possible acquisition. Even RBI has taken initiative for the same and the primary objective behind this move is to attain growth at the strategic level in terms of size and customer base.

This, in turn, upsurges the credit-creation capacity of the merged bank tremendously. Bank mergers make the bank vigorous to survive in the changing business environment. Through mergers the weaker banks find it easier to adapt themselves quickly and grow in the domestic and international financial markets.

Objectives / Hypothesis Of The Study
The primary objectives or research questions of the paper are:

1. To find out the impact of bank mergers on the shares.
2. To understand the reforms of Indian banking sector.
3. To study the performance of the banks in the pre and post stages of M&A.
4. To understand the merger of SBI and its associates.

Need For This Study
From the early 1990s, the structure of the Indian banking sector has meaningfully changed due to the deregulation and liberalization, coupled with divestment of public sector banks, admission of foreign banks and merger of many banks in India and globally. In the post reform period, close to 25 bank mergers took place in India. These mergers have a significant implication on the performance and profitability in the banking system.

Therefore, from the view point of both managerial and policy interests, it is very important to know the impact of these merges on the efficiency levels of banks and their temporal conduct so as to understand how the banking industry has been reacting to these emerging challenges and which banks are performing better than others in this period of transition.

Literature Review
For the purpose of this paper, the author reviewed several research papers to form an understanding of the functioning of mergers and acquisitions. These papers discussed heavily about the various impacts of mergers on the companies. A corporation can ensure growth internally and externally. Internal growth may be attained by increasing its operation or by creating new units, and external growth may be in the form of Merger and Acquisitions, takeover, Joint venture, Amalgamation etc. Many studies have investigated the various reasons for Merger and Acquisitions to take place, to focus on the effects of Merger and Acquisitions on Indian financial services sector.

Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms and stated that it had positive effect as their profitability, in most of the cases, deteriorated liquidity. After a few years of Merger and Acquisitions it came to the point that corporations may have been able to leverage the synergies arising out of the merger and Acquisition that have not been able to manage their liquidity. Study showed 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.

Kuriakose Sony & Gireesh Kumar G. S (2010)[4], assessed the strategic and financial similarities of merged Banks, and the relevant financial variables of respective Banks were considered to assess their relativity. The result of the study found that only private sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public sector Bank are unwilling towards their type of restructuring. Target Banks are more leverage than bidder Banks, so the merger helps in attaining optimum capital Structure for the bidders and the asset quality of target firms is very poor.

Anand Manoj & Singh Jagandeep[5] (2008) studied the impact of merger declarations of five banks in the Indian Banking Sector on the shareholders bank. These mergers were the Times Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd with the ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and the Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank had positive and significant impact on shareholder's wealth.

Research Methodology
Secondary data: E-Journals, Manuals, articles and online resources.

Analysis
This section of the research paper will deal with the detailed analysis of the concept of mergers and acquisitions in the banking sector.

Merger And Acquisitions - General Meaning

Merger is the amalgamation of two or more corporations into a single corporation where one subsists and the others lose their corporate existence. The survivor obtains all the assets and the liabilities of the merged corporations. All assets, liabilities and the stock of one corporation stand transferred to transferee Corporation in consideration of payment in the form of:

1. Equity shares in the transferee corporation,
2. Debentures in the transferee corporation,
3. Cash.[6]

An Acquisition refers to the procurement of a smaller corporation by a larger corporation. Acquisition is also known as a takeover. It occurs between the bidding and the target corporation. There may be either hostile or friendly acquisitions. In business combinations, an acquisition is the purchase by one corporation of a controlling interest in the share capital of another existing company.[7]

Recent Mergers Of Banks In India

In August 2019, the Finance Minister of India MS. Nirmala Sitharaman announced the merger of 10 Public Sector Banks into four entities. The logic behind this merger is to increase the global competitiveness of the Indian banks. Presently, the total Public Sector Banks reduced to 12 from 27 in 2017 in India.[8]

In this section of the paper we will be discussing the four mergers in detail

1. Merger Number 1: PNB+OBC+UBI
   Oriental Bank of Commerce (OBC) and United Bank of India (UBI) were merged with the Punjab National Bank (PNB). After this merger, PNB will be the second-largest Public Sector Banks of India after the State Bank of India in terms of the branch network. Its total branches would be 11,437 and the total Business of the PNB would be Rs. 17.95 lac crore.
    
2. Merger Number 2: Syndicate Bank+ Canara Bank
   Syndicate Bank is merged with the Canara Bank. After this merger, Canara bank would be the fourth largest Public Sector of India. The total business of Canara would be 15.20 lac crore with a branch strength of 10,342.
   
   This merger will reduce the cost of operations owing to network overlaps. These two banks have a similar work culture that is why it would lead to facilitate a smooth transition.
    
3. Merger Number 3: Andhra Bank+ Corporation Bank+ Union Bank of India
   Andhra Bank and Corporation Bank are merged with Union Bank of India. This merger would make Union Bank of India 5th largest Public Sector Bank. This merger would have the potential to increase the post-merger bank's business by 2-4.5 times. After this merger, the total business of Union Bank of India would be Rs. 14.59 lac crore while total branches would be 9,609.
    
4. Merger Number 4: Allahabad Bank + Indian Bank
   In the fourth merger, Indian bank was merged with the Allahabad Bank. After this merger, Allahabad bank will be the 7th largest Public Sector Bank of India. After the merger, the total business of Allahabad bank would be Rs. 8.08 lac crore and the number of branches would be 6,104. After the merger of these two banks the size of business would get doubled which would increase their global competitiveness.[9]

Impact Of These Mergers On Shares

The shares of the public sector banks closed after the mega merger of the PSU banks came into force. The Shares of Punjab National Bank dropped by 5.72%, while Canara Bank fell marginally by 0.17% on the BSE. On the other hand, Indian Bank gained 1.86% and Union Bank of India rose marginally by 0.17%.

The wider market portrayed a weaker trend, with the 30 share BSE barometer tanking 1,203.18 points or 4.08% to close at 28,265.31. This consolidation of banks maintains certain significance as it took place at a time when the entire country is under the garb of the COVID-19 outbreak, which had triggered a long and continuous lockdown in the country.[10]

Indian Banking Sector - Reforms

Narasimhan Committee:
The Narasimhan Committee, was set up in 1997, to file a report regarding the reforms in the Indian Banking Sector.

It submitted a report in 1998 with the following suggestions:

1. It focused on the use of merger of banks, to improve the size as well as operational strength for each of the banks.
2. It made a recommendation for the merger of the large banks in India, with an effort to make them stronger, so they stand strong in international trade.
3. It recommended speeding up of automation in the Public Sector Banks.
4. It recognized that the legal framework must be reinforced, in order to aim for credit recovery.
5. It recommended that there be 2 - 3 banks in India that be oriented globally, 8-10 national banks and a massive grid of local banks to help the system reach the remote areas of India.
6. It laid stress on the fact that bank mergers must take place among units of similar size. This suggests that weak banks merge with the weak ones while big banks with the bigger and competitive ones.
7. It also suggested the confinement of local banking network to the limits of states or a few districts.
8. It also suggested the review of the RBI Act, the Nationalization Act, Banking Regulation Act, as well as the SBI Act.[11]

Raghuram Rajan Committee:
Raghuram Rajan, a noted economist, recommended a regulatory system, which may reduce fluctuating financial cycles.

His suggestions for the banking sector in India were:

1. India is a vast nation in itself, hence, it is nearly impossible to control the flow of capital and therefore, the economy will always be indeterminate and instable.
2. In order to progress into large banks, it is required that an entry point be accessible in the system, which can be used by the bodies.
3. Technological advances may help in developing small banks and reduce the costs of operation.
4. Reassurance must be provided to the professional markets.
5. Underachieving PSUs were recommended to be sold.
6. The regulation of trade to be brought under the control of SEBI.
7. He also recommended an open-minded outlook towards merger of banks and takeovers.

Reasons For Mergers And Acquisitions In Banks

Mergers and acquisitions have molded the Indian Banking sector in a perfect manner. Though there seem to be diverse opinions on this particular material, yet there is always hope for an improvement in the current condition after bank mergers. The following are the reasons for the mergers to take place in banks.

1. Merger of weaker banks:
   The exercise of merger of weaker banks with stronger banks was encouraged in order to provide stability to weak banks but Narasimhan committee conflicted with this practice. They said that mergers can diversify risk management.
2. Rise in market competition:
   Invention of new financial products and merging of regional financial system are the reasons for merger. Markets industrialized and became more competitive and because of this, market share of all individual firm condensed and hence, mergers and acquisition started.
3. Economies of scale:
   Ability of producing economies of scale when firms are merged.
4. Skill & Talent:
   Allocation of skill takes place between two organization which helps them to progress and become more competitive.
5. Technology and Products:
   Introduction of e- banking and some monetary instruments / Derivatives. Removal of admission barrier opened the gates for new banks with high technology and old banks can't compete with them and hence they decide to merge.
6. Positive Synergies:
   When two companies merge their sole motive is to create a positive result which is higher than the shared effect of two individual companies working alone. Two features of it are cost synergy and revenue synergy.
7. Ill performing banks survived after merger and enhanced branch network geologically.
8. Larger customer base i.e., through rural reach and increased market share.
9. Achievement of infrastructure & restrict competition and prevent congestion of banks & utilize underutilized resources so that the banks can contest with the foreign banks in a global era.[12]

Merger Of SBI And Its Associates

The Union cabinet on June 15, 2016 accepted the merger of the five subsidiaries of State Bank of India with the holding bank, as the Indian banking system moves into a phase of alliance. The cabinet approved the merger of the subsidiaries namely State Bank of Mysore, State bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner and Jaipur and Bhartiya Mahila Bank Ltd with SBI.[13]

SBIs merger with subsidiaries noticed the combined entity's balance sheet at an enormous Rs.37 trillion, making it one of the top 50 banks in the world. The merger of five subordinate banks of the State Bank of India (SBI) with the parent is a major merger in recent times. It made SBI which was already the nation's major commercial lender by assets and deposits, even larger. The move came at a time when SBI like numerous other state-run banks was struggling to cope with increasing bad loans. Its net profit for the 3 months ended March 31, 2016 dropped by 66% from the year-ago, due to larger provisioning for bad loans.[14]

Three of the associate banks, SBBJ, SBT and SBM, were listed on the stock exchanges and investors praised the merger move. Stocks of the associate banks moved up sharply when the cabinet clearance for the move came in June.

SBI merger helped the bank to be recognized as one of the top 50 banks in the world. None of the Indian banks had held this position prior to the SBI merger. The visibility at a global level increased due to this merger. The merger also benefitted in getting economies of scale and decrease in the cost of doing business.

After the amalgamation SBI could withstand the robust competition from private sector banks and could amass more resources to channelize trained manpower across its branches. The merger of SBI and its subordinate banks resulted in the network increase of SBI and its reach multiplied. The shares of SBI and its associates posted marvelous earnings in the stock exchange thereby benefiting stake holders.

Findings And Suggestions
The study disregards the impact of possible variations in the accounting methods adopted by different corporations. The factors which effect the M&A performance may not be same for all corporations. The price of acquisition for mergers is not taken into consideration in the methodology.

The push should be on refining risk management abilities, corporate governance and strategic business planning. In short run, effort options like outsourcing, strategic alliances, etc. can be considered.

Banks need to take benefit of this fast altering environment, where product life cycles are quick. The Government should not opt for M&As as a means of bailing out of weaker banks. The larger banks should not be merged with weaker banks, as it will have adverse effect upon the asset quality of the stronger banks. The strong banks should be merged with stronger banks to compete with foreign banks and to enter in the global financial market.

Conclusion
The banking industry has been experiencing major Mergers and Acquisitions in the recent years, with a number of global players emerging through successive Mergers and Acquisitions in the banking sector. The current study indicates that the pre- and post- Mergers and Acquisitions of selected banks in India have no greater changes in profitability ratio; a few banks are satisfactory during the study period.

But in future, there are robust projections of improvements in profitability. However, results specify that mergers led to higher level of cost efficiencies for the merging banks. Merger between distraught and strong banks did not produce any significant efficiency gains to participating banks. However, the forced merger among these banks prospered in shielding the interest of depositors of frail banks but stakeholders of these banks have not revealed any gains from mergers.

The findings also establish that M&As impact on the shareholder value. The findings assert that the structural factors such as relative sizes of merging partners, technique of financing M&As and the number of bidders in M&As have the ability to influence the realization of a M&As success.

The findings indicate the importance of considering the size of a potential target, the method to be used in funding M&As. The findings note that the structural factors acting autonomously have the potential to influence the shareholder value. This infers that the administration of banks and other organizations intending to undertake M&As should seek to evaluate and consider how these structural factors are likely to impact on the achievement of the intended M&As.

The Indian financial system requires very huge banks to absorb several risks that have appeared from operating in local and international market. The prime aspects for future mergers in Indian banking industry included the challenges of free convertibility and requirement of large investment banks. Therefore, the Government and policy makers should be more thoughtful in endorsing merger as a way to gain economies of scale and scope.

End-Notes:

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4. Kuriakose Sony & Gireesh Kumar G. S, Assessing the Strategic and Financial Similarities of Merged Banks: Evidence from Voluntary Amalgamations in Indian Banking Sector, Sci. & Soc, 8(1) 49-62, (2010).
5. Manoj Anand and Jagandeep Singh; Impact of Merger announcement on Shareholders wealth: Evidence from Indian Commercial Bank; Vikalpa, vol 33 No 1-2008, Pp.35-54.
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