Analyzing the Impact of Mergers and Acquisitions on Customers And

Mukt Shabd Journal ISSN NO : 2347-3150 Analyzing the Impact of Mergers and Acquisitions on Customers and Employees in Indian Banking Sector Ankit Dhamija Assistant Professor, Amity Business School, Amity University Gurugram, Haryana, India Deepika Dhamija Assistant Professor, Amity College of Commerce, Amity University Gurugram, Haryana, India Dr Ravi Ranjan Assistant Professor, Amity College of Commerce, Amity University Gurugram, Haryana, India ABSTRACT The Indian banking industry has become so volatile that every few months; there is news of one or few smaller banks being merged into a bank with larger presence across the nation or a bigger bank acquiring few smaller banks. This merging and acquisition of banks has become a necessity for Indian Economy to grow since, the non performing banks are increasing the burden on economy in the form of bad debts/loans, inability to generate profits, sell their banking products, inability to attract and retain customers and many more. Also, Mergers and acquisitions have become vital methods within the industry to form money gains enormously and to enhance the economies of scale. Through this, banks are able to get established brand names, new geographies, and complementary product offerings; however an additional opportunity to cross-sell to new accounts acquired is also there. Throughout the merging method, one company survives and therefore the other company loses its company existence. On the opposite hand, the acquisition means takeover. The biggest impact in such cases is on the bank employees and customers. There are a lot of issues that customers and employees have to deal with and there are also some benefits of this situation.This paper assesses the impact of Mergers and Acquisitions on bank employees and customers, their position before and after Mergers & Acquisitions and finding out the reasons behind these Mergers & Acquisitions. The objectives of the research focus on the customer’s perception and employee’s perception before and after the merger and acquisition of banks. The primary and secondary data both have been used to achieve the objectives. The findings of the study indicate that the banks have been positively affected by the event of a merger. Keywords: Merger & Acquisition, Indian Banking Sector, Takeover, Banking 1. INTRODUCTION Bank’s nomenclature is said as a monetary institute or a company that is allowed by the state or central government to manage cash by accepting deposits, giving out loan and finance insecurities. The major role of banks is that the growth and expansion of the economy by providing funds for investment. In recent times the Banking Sector has been undergoing loads of changes in terms of rules and effects of the economic process. These changes have affected this sector each structurally and strategically. One such profitable strategy is that the method of consolidation of the banks. There are many ways in which to consolidate the Banking Industry; the foremost common adopted by banks is a Merger & Acquisition. Mergers and acquisitions activity is often outlined as a kind of restructuring therein they result in some entity reorganization with the aim to provide growth or positive worth. The abbreviation of the merger can be broken down in parts where M means ‘Mixing’, E means “Entities”, R means “Resources for”, G means ”Growth”, E means “Enrichment” and R means” Renovation from a legal purpose”. A merger can be defined as a method of unification of two players into a single entity [34]. According to the Oxford Dictionary, the expression “merger means combing two commercial companies into one. ”Bank merger is an event of when previously distinct banks are consolidated into one institution (Pilloff and Santomerro, 1999).A merger occurs by adding the active (bidder) bank assets and Liabilities to the target(Passive) banks’ balance sheet and acquiring the bidder’s bank name through a series of legal and Administrative measures. The merger is also a way of mixing two business entities below the common possession. A merger happens once an independent bank loses its charter and becomes a neighborhood of an existing bank with one headquarter and a unified branch network. The word acquisition conjointly called a takeover or an acquisition is that the shopping for of one company (the ‘target’) by another. A sale is also friendly or hostile. Merger and Acquisition in Indian banking sectors have been initiated through the recommendations of Narasimha committee II. The committee recommended that “merger between the strong bank and financial institutions would make for greater economic and commercial sense and would be the case where the whole is greater than the sum of its parts and have “force multiplier effect”. The Indian Banking Sector is divided into two era(s), the liberalization era and the post-liberalization era. Within the pre-liberalization era government of India nationalized fourteen banks on 19 July 1965 and later an additional six Banks were nationalized as on 15 April 1980. In the year 1993 government merged the new banks of India and Punjab National Banks and this reduces from twenty Nationalized Banks to 19 Volume IX, Issue V, MAY/2020 Page No : 3944 Mukt Shabd Journal ISSN NO : 2347-3150 Nationalized Banks [34]. In the post-liberalization regime, the government had initiated the policy of liberalization and licenses were issued to the Private Banks that cause the expansion of the Indian Banking Sector. The Indian Banking Industry shows a symptom of improvement in performance and with efficiency after the global crises in 2008-2009. In the Indian Banking Industry has a much better position than it was at the time of crises, the government has taken varied initiatives to strengthen the national economy. The economic recovery gained strength on the bank of a range of financial policy initiatives taken by the RBI [33]. Mergers and acquisitions within the Indian Banking Sector could be a common development across the globe. The first objective behind this move is to realize growth at the strategic level in terms of size and customer base. This, in turn, will increase the credit-creation capability of the merged bank highly. Small banks fearing aggressive acquisition by an oversized bank sometimes enter into a merger to extend their market share and defend themselves from the possible acquisition. Banks additionally like mergers and acquisitions to reap the advantages of economies of scale through reduction of prices and maximization of both economic and non-economic benefits. The method of merger and acquisition isn't a new happening in case of Indian banking. Grind lays Bank merged with Standard Chartered Bank, Times Bank with HDFC Bank, Bank of Madura with ICICI Bank, Nedungadi Bank Ltd. with Punjab National Bank and Global Trust Bank merged with Oriental Bank of Commerce. Because of the entire Indian Banking Industry is witnessing a paradigm shift in systems, processes, strategies, it would warrant the creation of new competencies and capabilities on an on-going basis that a setting of continuous learning would need to be created thus on enhance knowledge and skills. Table 1: Schedule of Merger &Acquisition Deals of Indian Banks [33] [31] Merger year Target bank Acquirer Bank 1993 New Bank of India Punjab National Bank 1994 Bank of Karad Bank of India 1995-1996 Kashinath Seth Bank State Bank of India 1996-1997 Punjab Co-op Bank Ltd Oriental Bank of Commerce 1996-1997 Bari Doab Bank Ltd Oriental Bank of Commerce 1999 Bareilly Corp Bank Ltd Bank of Baroda 1999 Sikkim Bank Ltd Union Bank of India 2000 Times Bank Ltd HDFC Bank Ltd 2001 Bank of Madura ICICI Bank 2002 Benaras State Bank Ltd Bank of Baroda 2003 Nedungadi Bank Ltd Punjab National Bank 2004 IDBI Bank Limited Industrial Development Bank of India 2004 South Gujarat Local Area Bank Bank of Baroda 2004 Global Trust Bank Ltd Oriental Bank of Commerce 2005 Centurion Bank Bank of Punjab 2005 United Western Bank Ltd. IDBI Ltd. 2006 Ganesh Bank of Kurandwad Federal Bank 2006 United Western Bank Industrial Development Bank of India 2006 Lord Krishna Bank Centurion Bank of Punjab 2006 Sangli bank ICICI Bank 2007 Bharat Overseas Bank Indian Overseas Bank 2007 The Sangli Bank Ltd. ICICI Bank 2007 Lord Krishna Bank Ltd. Cent. Bank of Punjab Ltd. 2008 State Bank of India Global Trade Finance Ltd 2008 Centurion Bank of Punjab HDFC 2010 Bank of Rajasthan ICICI Bank 2014 ING Vyasa Bank Kotak Mahindra Bank 2017 Bharatiya Mahila Bank (BMB), State Bank of State Bank of India Travancore (SBT), State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) 2018 Capital First IDFC Bank Volume IX, Issue V, MAY/2020 Page No : 3945 Mukt Shabd Journal ISSN NO : 2347-3150 2019 Oriental Bank of Commerce & United Bank of Punjab National Bank India 2019 Syndicate Bank Canara Bank 2019 Andhra Bank & Corporation Bank Union Bank of India 2019 Allahabad Bank Indian Bank 2019 Vijaya Bank & Dena Bank Bank of Baroda As it is visible from Table 1 that bank mergers and acquisitions have been going on continuously in Indian Banking history. Very few studies have tried to assess the impact of such mergers and acquisitions on both the bank employees and customers together. The authors in this paper will take up this research gap and present their findings. The rest of the paper is organized as follows: Section 2 presents the Objectives and Research Methodology, Section 3 presents the Review of Literature, and Section 4 presents the Data Analysis and Findings, Section 5 presents the recommendations based on findings of the study, Section 6 presents the Conclusion and Section 7 presents the bibliography. 2. OBJECTIVES AND RESEARCH METHODOLOGY Following research objectives have been formulated: To analyze the impact of merger & acquisition of banks on the lives of the bank employees.

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