In February, HDFC, which is India's second largest private bank after ICICI, sealed the largest ever merger in Indian financial history with CBoP for Rs 9,510 cr. This has set up a new trend because, earlier, bank mergers in India were largely bailouts, with the stronger bank swallowing the weaker one, or reverse mergers to develop a new business model such as that of ICICIs and IDBIs.
However, in this case, at the time of the merger, both the banks were healthy and so it can't be dubbed as a `merger of unequals' or a larger bank completely gobbling up a smaller or weaker one; rather it is akin to a `merger of strength'. However, given the post-2009 scenario, when foreign banks are likely to be on a par with the domestic banks, despite some regulatory hitches, the merger of two strong banks heralds a new era of consolidation in the Indian banking industry as a whole.
Both these new generation banks were incorporated and licensed by the Reserve Bank of India (RBI) in the post-liberalization era of the mid-1990s, and both of them had sipped merger waters beforehand. In fact, HDFC Bank had orchestrated the first merger in private sector banking by taking over the troubled Times Bank from media giant Bennett, Coleman & Co. in 1999. CBoP is also no stranger to mergers. In fact, it began its existence as Centurion Bank. In 2005, the Centurion Bank had merged with the North India-based Bank of Punjab, and last year, CBoP took over Kochi-based Lord Krishna Bank.
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