Recent deals in the Indian banking industry show that the M&A wave may start in the medium term. The Government has increased FDI limit in banks and it is expected that voting right limit will also be increased. This will create a conducive environment for M&A in India. HSBC has recently taken over the major chunk of shares in the UTI Bank. Even though both banks have claimed that it was only an investment decision, it has significant implications for the Indian banking industry. There are other private sector banks like centurion Bank, whose restructuring proposals are pending. ABN Amro Bank took over the retail business of Bank of America.

While this deal was not obviously the case of a merger, it still created a stir in the banking circle. Global Trust Bank is in an advanced stage with Development Bank of Singapore to offer 49% stake through preferential allotment. All of these developments have significant implications for Indian banking.

The RBI governor's concern at the bank economists' conference about lacunae in the legal and regulatory framework on consolidation among banks has created a fresh round of debate on M&As among Indian banks. Some bankers feel that even though large size and economies of scale are severely debated, mergers among public sector banks may not happen in the near future.

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