The IUP Journal of Management Research
The Merger of Associate Banks with State Bank of India: A Pre- and Post-Merger Analysis

Article Details
Pub. Date : Jan, 2019
Product Name : The IUP Journal of Management Research
Product Type : Article
Product Code : IJMR81901
Author Name : Neelam Tandon, Navneet Saxena and Deepak Tandon
Availability : YES
Subject/Domain : Management
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No. of Pages : 12

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Abstract

The changing global scenario and sustainability of banks implead amalgamation in the banking industry as a corporate strategy. It enhances their financial and operational strengths, maximizes their global reach, helps them achieve synergy by combining business activities, improves performance and reduces costs. This paper focuses on the six-way horizontal merger between State Bank of India (SBI) and its five associate banks and Bharatiya Mahila Bank which catapulted the SBI group to the top 50 banks of the world. The objective is to assess the impact of SBI merger with its associate banks, their position before and after the merger, find out the reasons behind the merger and study the advantages offered by the merger. The authors conclude that though as per the Earnings per Share (EPS) there is dilution and no competitive advantage obtained due to the merger, the other motives such as enhanced productivity, multi-dimensional banking, increased operational efficiency and customer delights will be advantageous to the evolved entity. Overall, integration of investments and treasuries will bring cost-saving and synergy in this era of megamergers.


Description

State Bank of India (SBI) is an Indian multinational, public sector banking and financial services company. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian subcontinent. Bank of Madras was merged with the other two presidency banks, Bank of Calcutta and Bank of Bombay, to form the Imperial Bank of India, which in turn became SBI. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India (RBI) taking a 60% stake, and renamed it as SBI. In 2008, the government took over the stake held by the RBI.


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