The recent talks of a merger between Bank of Baroda and Dena Bank have heated up the debate on M&As (Mergers and Acquisitions) among the public sector banks. It is expected that after allowing 74% FDI in the private sector banks, in the post-WTO regime, more M&As will take place. The RBI has already issued guidelines for implementing Basel II norms, due for implementation in 2006, in some banks. This will also ignite M&As among Indian Banks.
The Indian financial market is agog with the news about the proposed merger of the Bank of India and the Union Bank of India (considered to be two strong banks and also rumors of a merger between the Bank of Baroda and Dena Bank). In the past, some of the public sector banks have taken over private sector banks. State Bank of India, for instance, took over Bank of Cochin Limited, Bank of India took over Parur Central Bank Limited, etc. These latter mergers came as a consequence of the advisory role played by the Reserve Bank of India in the situation prevailing then. The latest move was the takeover of Global Trust Bank Limited, which was in existence for not more than 13 years, by the Oriental Bank of Commerce (a PSB) In the recent past Punjab National Bank has also taken over New Bank of India (another PSB) and also a private sector bank Nedungadi Bank Limited. These types of takeovers were at the behest of the Reserve Bank of India to strengthen the banking systems and also to instill confidence among the depositors.
These takeovers have enabled the parent bank to enlarge their geographical presence, increase the resources and asset base and enhance the capacity to undertake larger exposure. Of course, simultaneously non performing loan portfolio might also have gone up. |
