A study on the impact of merger of associate banks with State Bank of India on its finacial performance

The State Bank of India, the largest public sector bank in India has been maergining its associate banks. Recently, during the 2017, five of its associate banks, namely, state Bank of Travancore, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Bikaner & Jaipur have been merged with the State Bank of India on 1^st April 2017. There may be several causes for merging the one or more banks with each other. Usually, the merging process is taken to become stronger financially and to also to avail the benefits of large scale business operations. One of the reason for the merger might be to avoid competition within themselves and to maximize the profit and wealth by integrating small size banks with big size bank. In this case, the five associate banks smaller in size and the SBI is bigger and the SBI has merged all the five banks with it. In this scenario, the researcher intends to know whether the SBI has gained by merging those five banks with it. For this purpose, an attempt has been made to measure the impact of merger of five banks with the SBI on its profitability, operating efficiency, NAP and Capital adequacy with the use of financial performance indicators, such as Return on Assets, Return on Equity, Earning Per share, Profit per Employee, Operating Cost to Total Income, Net NPA to Net Advances and Capital Adequacy Ratio. By using the secondary data for the pre-merger period of five years and postmerger period, gathered from the Financial statements of SBI from its official website, analysis has been done and by applying t-test the significance of impact of merger on the profitability, operating efficiency, NPA and CAR tested. Finally, came to a conclusion that there is significant adverse impact of merger on the profitability, operating efficiency and NPA. It has also been concluded that there is no significant impact of merger on the Capital Adequacy Ratio.