Mergers and acquisitions in indian banking sector

After the introduction of LPG (1991) in India, private and foreign players are playing major role. They are introducing new products and services which make others to enhance their skill in the respective area. Mergers & Acquisitions (M&A) are a significant form of business strategy today for Indian Corporate. A large number of Mergers & Acquisitions deals are making headlines all over the world. One may wonder as to what it is that necessitates Mergers & Acquisitions deals. One may be interested in knowing the main deals of the same and motives behind it. M&A may take different shapes. Simply, a merger is a transaction involving two or more corporations, swapping stocks, but only acquiring firm survives. Mergers usually occur between firms of somewhat similar size and are usually friendly. Acquisition is the purchase of a company that is completely absorbed as an operating subsidiary or division of the acquiring corporation. M&A refers to a combination of two or more firms into one firm; it may involve acquisition or consolidation. In absorption, one firm acquires one or more other firms. In consolidation, two or more firms combine to form a new entity. The Indian banking sector reforms initiated in the year 1992 with deregulation of banking sector in India. The Government of India, the owner of public sector banks, has expressed its interest in for strengthening these banks through selective M&A in Indian Banking sector. Consolidation of the banking sector, it is presumed, is required to improve operational efficiency and to facilitate the emergence of globally competitive banks. Indian Banking sector will have to explore inorganic growth options in order to ‘Significant’ challenges emanating from large sized foreign banks to be known for their deep pockets, advanced technology and skilled personnel. Indian banks also started hunting for M & A. This equation is specifically applicable to M&A in the Indian banking sector. The key principle behind buying a bank is to create shareholder value over and above that of the sum of the two banks. In other words two banks together are more valuable than two separate banks. This paper highlights the M&A in Indian Banking sector in post liberalization era with the analysis of motives for the same.