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Merger and Acquisition of Indian Bank: Boon or Curse for Indian Economy

Author : Punam Agrawal

Abstract :

Banking industry plays important role in money creation in economy, it accepts deposits from people and gives loans and advances. This study aims to analyze the effect of merger and acquisition of banks on Indian economy, whether it is beneficial or not. Taking advantage of economies of scale is one of the primary goals of banking mergers and acquisitions. This study is based on secondary data which is collected from related journals, websites and e-newspapers. This study found that through merger liquidity of banks can be increased which helps in boost the economy, risk can be diversified, ill performing banks can be survived, technology can be improved and can be confronted the issues of NPAs. With the help of help of merger banks will be able to compete, build a few strong banks which form a pillar of the economy, big banks can better deal with NPAs, create economies of scale in operation, investors’ confidence increase and strong banks attracts investments. At the time of merger some problem also faced by banks such as, each banks laws and policies are different, the ramifications of a failure of a large bank are enough to devastate the country's economy, due to inefficient NPA policies and regulatory forbearance mergers will not alleviate the problem of nonperforming assets, there are issues with synchronisation and there is no guarantee that the newly established banks will be able to compete in the global market. It shows that merger of banks has both positive and negative impact on Indian economy. This study concluded that merger of banks has advantages as well as disadvantages, its two wheels of the same vehicle that move together.

Keywords :

Indian banking, merger and acquisition, Indian economy