Mergers & Acquisitions in Indian Banking Sector: Regulatory Issues & Challenges

16 Pages Posted: 22 Feb 2014

Date Written: February 20, 2014

Abstract

Banking sector is the most extensively regulated sector in Indian financial market. RBI, the sole regulator has the responsibility of regulating, supervising and assisting the banking companies in carrying out their fundamental activities and meets their liabilities as and when they accrue. Despite the fact that regulation enhances performance at various levels, business growth is the perpetual quest for all companies, and banking companies are not alien to that. Rapid growth of consolidations has depicted that banking operations, though strictly regulated aspire for a high rate of profitability and business presence. There are numerous examples present in Indian context that show varied reasons of mergers and acquisitions in banking sector in India. Some study these on the counts of profits and performance after mergers; others look these mergers as helping the banks in overcoming their likely dissolution.

Keeping everything apart from the purview of this paper, this paper shall focus entirely on specific regulatory issues associated with the mergers and acquisitions in banking sector in India and shall (on the basis of hypotheses) tend to explain various commercial issues annexed to it or incidental thereto. Some of the specific issues highlighted in the paper cover the merger policies of RBI, competition regulation issue between CCI and RBI, etc. Going through the insight of a typical merger process between two banks, this paper shall throw light upon implications of mergers in banking sector of India. The list is endless, when we talk of issues related to bank mergers and acquisitions because in a spit fall, the economic crisis does not appear to be far from the sight. RBI is constantly updating its procedural norms relating to bank mergers and acquisitions that call for serious interpretation to the whole idea. This paper is an attempt towards such an objective.

The tabled Banking Regulation (Amendment) Bill, 2011 would be a central figure under scrutiny in the paper and shall corroborate the objectives and perceptions of regulators of various sectors in India. While ‘achievement of economies of scale’ may be one of the agendas behind such consolidation, restructuring of weak banks employs more critical issues. This research report thus dwells into the core reasons behind RBI, monopolizing the banking merger regulations and future of M&A in banking in light of such rigid stands taken by RBI.

Keywords: M&A in Banking, Indian Banking Sector, M&A

Suggested Citation

Shakya, Shail, Mergers & Acquisitions in Indian Banking Sector: Regulatory Issues & Challenges (February 20, 2014). Available at SSRN: https://ssrn.com/abstract=2399288 or http://dx.doi.org/10.2139/ssrn.2399288
No contact information is available for Shail Shakya

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