The Financial regulator has recently given the hint that it will consolidate some banks and make four to five bigger banks, with a capacity to compete with international banks like Citi Bank, Bank of America, etc. This move will have many positive and negative impacts on stakeholders. Customers will get innovative and international level products, better inter-personal interface, shareholders will get better returns, employee will be better incentivized for good performance, there will be retrenchment of excess employees, etc.
Organizations compete with each other to grab more market share and reach the pinnacle of success by being the leader. To achieve this end, there are various strategic alternatives. Corporate growth is sine-qua-non and for this there are mainly two approaches.
Organic growth is a time consuming process and of internal nature, whereas Inorganic growth is short-cut to corporate growth and is of external nature. Mergers and acquisitions are inorganic in nature and with lesser time the organization grows in disproportionate manner in comparison with organic growth. Merger is nothing but submerging the individual corporate identities of two or more companies of similar size and strength to form a single entity in a friendly atmosphere. It is a consolidation process which creates synergies and additional benefits or competitive advantages which in principle benefit all the stake holders. Merger motivations are multifarious. Some of the perceived benefits of merger can be highlighted.
Indian Banking, since the Financial Sectors Reforms Process, has undergone sea changes. There are entry of New Generation Banks, there have been major technological changes, product innovations, structural changes, business process re-engineering, entry of more specialized personnel, additional product range, an overall change in mindset, etc. At present, there are about 90 scheduled commercial banks, four non-scheduled commercial banks and 196 regional rural banks (RRBs). The State Bank and its seven associates have about 14,000 branches; 19 nationalized banks-34,000 branches; the RRBs-14,700 branches; and foreign banks around 225 branches. However, only State Bank of India is among the top 200 banks in the world. As on 31.03.2003, the top five banks in India and their performance highlight is given below in terms of business turnover and profit. |
