Sonu Black Book Project

Chapter 1
Introduction
1.1 Introduction
The Banking Sector is serving nation and

strengthening the
Indian Economy. The Indian banking system is
now consists of
12 public sector banks, 22 private sector
banks, 45 foreign
banks, 56 regional rural banks, 53 scheduled
urban cooperative
banks and 31 scheduled state co-operative
banks. The banking
sector has seen ongoing mergers and
amalgamation in recent
years. In consultation with the Reserve Bank of
India (RBI), the
Central Government can create a scheme for
the amalgamation
of any nationalized bank with any other
nationalized bank or
banking institution in accordance with the
Banking Companies
1
Acts 1970 and 1980 (Acquisition and Transfer
of Undertakings).
Under this scheme, on 2 January 2019, the
Government of
India approved the merger of Bank of Baroda
with Vijaya Bank
and Dena Bank. Under the terms of the merger,
for every 1,000
shares of Dena Bank and Vijaya Bank
shareholders received
110 and 402 Bank of Baroda equity shares,
respectively, of face
value Rs. 2. Vijaya Bank and Dena Bank are
now merged into
Bank of Baroda from 1st April 2019. After
the merger Bank of
Baroda has become India's third-largest lender
after State bank
of India and HDFC Bank. The Government has
agreed to grant
some Rs. 5,042 Crore to Bank of Baroda
to strengthen the
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merger‟s financial position. Merger of Bank
of Baroda is also
India's first-ever three-way consolidation of
banks, with this
merger Bank of Baroda is emerging as the
second-largest
public-sector bank. Due to the merger, Bank
of Baroda ranks
second in India in terms of number of
branches.
The agenda of this merger was to reduce
Non-performing
assets (NPA). At the time of the merger
proposal, the gross
NPA ratios of Bank of Baroda, Vijaya
Bank and Dena Bank
were 12.4%, 6.9% and 22% respectively. As
official of Bank of
Baroda said before merger that the merged
entity would 40%
more deposits and 44% more loans, but it
would also have 70%
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more distribution. So there would be more
products and
services available to customers after merger.
Total business of
Bank of Baroda is expected to be more than
Rs.15 trillion afte
strengthening the
now consists of
banks, 45 foreign
urban cooperative
banks. The banking
India (RBI), the
the amalgamation
4
Banking Companies
of Undertakings).
Government of
with Vijaya Bank
for every 1,000
now merged into
the merger Bank of
after State bank
5
agreed to grant
to strengthen the
of Baroda is also
banks, with this
second-largest
of Baroda ranks
branches.
Non-performing
proposal, the gross
Bank and Dena Bank
official of Bank of
6
entity would 40%
would also have 70%
products and
Total business of
Rs.15 trillion afte
strengthening the
now consists of
banks, 45 foreign
urban cooperative
banks. The banking
7
India (RBI), the
the amalgamation
Banking Companies
of Undertakings).
Government of
with Vijaya Bank
for every 1,000
now merged into
8
the merger Bank of
after State bank
agreed to grant
to strengthen the
of Baroda is also
banks, with this
second-largest
of Baroda ranks
branches.
Non-performing
proposal, the gross
9
Bank and Dena Bank
official of Bank of
entity would 40%
would also have 70%
products and
Total business of
Rs.15 trillion afte
strengthening the
now consists of
banks, 45 foreign
urban cooperative
10
banks. The banking
India (RBI), the
the amalgamation
Banking Companies
of Undertakings).
Government of
with Vijaya Bank
for every 1,000
11
now merged into
the merger Bank of
after State bank
agreed to grant
to strengthen the
of Baroda is also
banks, with this
second-largest
of Baroda ranks
branches.
12
Non-performing
proposal, the gross
Bank and Dena Bank
official of Bank of
entity would 40%
would also have 70%
products and
Total business of
Rs.15 trillion afte
In modern economy the importance of banks cannot be neglected. Banking sector plays a vital role in the
economic development of the country. Banking sector are a financial institution, which perform as various
function like accepting deposits, lending loans to agricultural & industrial concerns. The banking industry
worldwide to be transformed concomitant with a paradigm shift in the Indian economy from manufacturing
sector to nascent service sector. Indian Banking is as a whole in the undergoing changes. Indian banks have
always proved beyond the doubt that adaptability to themselves into an agile and resilient organization. The
Banking sector has been seen ongoing mergers & amalgamation in recent years. The Reserve Bank of India
(RBI), the Central Government can create a scheme for the amalgamation of any nationalized bank with any
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other nationalized bank or banking sector in accordance with the banking companies Acts 1970 and 1980
(Acquisition and Transfer of undertaking).
From the past three decades India ‘s banking system that has several outstanding achievements to its credit.
The most striking is it extensive reach. Indian banking system has reached even to the remote corners of the
country. One of the main reasons of India ‘s growth process is that the Indian banking system has reached
even to the remote corners of the country. Previously an account holder had to wait for hours and hours at
the bank counters for getting a draft or withdrawing his own money. But today they have a choice. Further
the most efficient bank transferred money from one branch to another branch in two days. But now a day it
is simple as instant messaging or dials a pizza. Money has become the order of the day. In India banks are
playing a crucial role in the socio-economic progress of the country after the independence. Indian banks
have been going through a fascinating phase 7 through the rapid changes that brought about by the financial
sector reforms, which have been implemented in a phased manner. The current process of the transformation
that should be viewed as an opportunity to convert into an Indian banking that sound, strong and vibrant
system capable of playing its role efficiently and effectively on its own without imposing any burden on
government. The government has announced after the liberalization of the Indian economy that a number of
reforms is measures on the basis of the recommendation of the Narasimhan Committee to make a banking
sector economically viable and competitively strong.
Mergers and acquisition are having both the aspects of the strategic management ‘s corporate finance and
management dealing with the buying of selling dividing and combining the different companies of the
similar entities. After the merger the result is the transact the ownership and a control of a firm to another.
M&A is defined as a restructuring of the result in some entity reorganization with having the aim to provide
growth or positive value. The consolidation of an industry or the sector that occurs when the wide spread
M&A activity concentrates the resources of many small companies into a few larger ones such as occurred
with the automotive industry between 1910 to 1940.
1.2 Company Profile
Bank of Baroda
Bank of Baroda (BOB) offers retail, agriculture, private and commercial banking; and other related financial
solutions. It includes loans, deposit services, and payment cards. The bank offers loans for homes, vehicles,
education, agriculture, personal and corporate requirements, mortgage, securities, and rent receivables,
among others. It provides current and savings accounts; fixed and recurring deposits; debit, credit, and
prepaid cards. The bank also provides insurance coverage for life, health, and general purposes. It offers
services such as treasury, financing, mutual funds, cash management, international banking, digital banking,
internet banking, start-Up banking, and wealth management. The bank has operations in Asia-Pacific,
Europe, North America, and the Middle East and Africa. BOB is headquartered in Baroda, Gujarat, India.
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Headquarters India
Address Suraj Plaza-1, Sayaji Ganj, Mumbai, Maharashtra, 400051
Websitewww.bankofbaroda.com
No of Employees79,173
Industry Financial Services
Ticker Symbol & Exchange BANKBARODA (NSE)
Revenue (2023) $11.9B -2% (2023 vs 2022)
Net Income (2023) 407.2% (2023 vs 2022)
Market Cap*$10.6B
Net Profit Margin (2023) 416.8% (2023 vs 2022)

Dena bank
Dena Bank is a commercial banking institution which provides personal and commercial banking services.
The bank offers savings account, current account, senior citizen schemes, loans, trade finance schemes,
corporate banking and international banking services. The firm also offers various banking products and
services for small and medium enterprises. Founded in 1938, Dena Bank is based in Mumbai, India.
Website
www.denabank.com
Formerly Known as Devkaran Nanjee Banking Company

Year Founded 1938
Service Provider Type Commercial Bank
Primary Office
C-10, G Block
Bandra-Kurla Complex, Bandra East
Mumbai, Maharashtra 400051
India
1.3 History
Bank of Baroda
In 1908, Sayajirao Gaekwad III, set up the Bank of Baroda (Bob), with other stalwarts of industry such as
Sampatrao Gaekwad, Ralph Whitenack, Vithal Das Thakersey, Lallubhai Samaldas, Tulsidas Kilachand and
NM Chokshi. Two years later, Bob established its first branch in Ahmedabad. The bank grew domestically
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until after World War II. Then in 1953 it crossed the Indian Ocean to serve the communities of Indians in
Kenya and Indians in Uganda by establishing a branch each in Mombasa and Kampala. The next year it
opened a second branch in Kenya, in Nairobi, and in 1956 it opened a branch in Tanzania at Dar-es-Salaam.
Then in 1957, Bob took a big step abroad by establishing a branch in London. London was the centre of the
British Commonwealth and the most important international banking centre. In 1958 Bob acquired Hind
Bank (Calcutta; est. 1943), which became Bob’s first domestic acquisition.
1960s
In 1961, BoB acquired New Citizen Bank of India. This merger helped it increase its branch network
in Maharashtra. BoB also opened a branch in Fiji. The next year it opened a branch in Mauritius
In 1963, BoB acquired Surat Banking Corporation in Surat, Gujarat. The next year BoB acquired two banks:
Umbergaon People's Bank in southern Gujarat and Tamil Nadu Central Bank in Tamil Nadu state.
In 1965, BoB opened a branch in Guyana. That same year BoB lost its branch in Narayanganj (East
Pakistan) due to the Indo-Pakistani War of 1965. It is unclear when BoB had opened the branch. In 1967 it
suffered a second loss of branches when the Tanzanian government nationalised Bob’s three branches there
at (Dar es Salaam, Mwanga, and Moshi), and transferred their operations to the Tanzanian government-
owned National Banking Corporation.
In 1969, the Indian government nationalised 14 top banks including BoB. BoB incorporated its operations in
Uganda as a 51% subsidiary, with the government owning the rest.
1970s
In 1972, BoB acquired Bank of India's operations in Uganda. Two years later, BoB opened a branch each
in Dubai and Abu Dhabi.
Back in India, in 1975, BoB acquired the majority shareholding and management control of Bareilly
Corporation Bank (est. 1954) and Nainital Bank (est. in 1922), both in Uttar Pradesh and Uttarakhand
respectively. Since then, Nainital Bank has expanded to Uttarakhand, Uttar Pradesh, Haryana, Rajasthan and
Delhi state. Right now, BoB have 99% shareholding in Nainital Bank.
International expansion continued in 1976 with the opening of a branch in Oman and another in Brussels.
The Brussels branch was aimed at Indian firms from Mumbai (Bombay) engaged in diamond cutting and
jewellery having business in Antwerp, a major centre for diamond cutting.
Two years later, BoB opened a branch in New York and another in the Seychelles. Then in 1979, BoB
opened a branch in Nassau, the Bahamas.
1980s
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In 1980, BoB opened a branch in Bahrain and a representative office in Sydney, Australia. BoB, Union Bank
of India and Indian Bank established IUB International Finance, a licensed deposit taker, in Hong Kong.
Each of the three banks took an equal share. Eventually (in 1999), BoB would buy out its partners.
A second consortium or joint-venture bank followed in 1985. BoB (20%), Bank of India (20%), Central

Bank of India (20%) and ZIMCO (Zambian government; 40%) established Indo-Zambia Bank in Lusaka.
That same year BoB also opened an Offshore Banking Unit (OBU) in Bahrain (Gulf).
Back in India, in 1988, BoB acquired Traders Bank, which had a network of 34 branches in Delhi.
1990s
In 1992, BoB opened an OBU in Mauritius, but closed its representative office in Sydney. The next year
BoB took over the London branches of Union Bank of India and Punjab & Sind Bank (P&S). P&S's branch
had been established before 1970 and Union Bank's after 1980. The Reserve Bank of India ordered the
takeover of the two following the banks' involvement in the Sethia fraud in 1987 and subsequent losses.
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In 1996, BoB Bank entered the capital market in December with an initial public offering (IPO). The
government of India is still the largest shareholder, owning 66% of the bank's equity.
In 1997, BoB opened a branch in Durban. The next year BoB bought out its partners in IUB International
Finance in Hong Kong. Apparently, this was a response to regulatory changes following Hong Kong's
reversion to the People's Republic of China. The now wholly owned subsidiary became Bank of Baroda
(Hong Kong), a restricted license bank. BoB also acquired Punjab Cooperative Bank in a rescue. BoB
incorporate a wholly–owned subsidiary, BOB Capital Markets, for broking business.
In 1999, BoB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly had 64 branches,
including four in Delhi. In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda Guyana.
BoB added a branch in Mauritius and closed its Harrow Branch in London.
2000s
In 2000 BoB established Bank of Baroda (Botswana). The bank has three banking offices, two in Gaborone
and one in Francistown. In 2002, BoB converted its subsidiary in Hong Kong from deposit taking company
to a Restricted License Bank.
In 2002 BoB acquired Benares State Bank (BSB) at the Reserve Bank of India's request. BSB had been
established in 1946 but traced its origins back to 1871 and its function as the treasury office of the Benares
state. In 1964 BSB had acquired Bareilly Bank (est. 1934), with seven branches in western districts of Uttar
Pradesh; BSB also had taken over Lucknow Bank in 1968. The acquisition of BSB brought BoB 105 new
branches. Lucknow Bank, a unit bank with its only office in Aminabad, had been established in 1913. Also
in 2002, BoB listed Bank of Baroda (Uganda) on the Uganda Securities Exchange (USE). The next year
BoB opened an OBU in Mumbai.
In 2004 BoB acquired the failed south Gujarat Local Area Bank. BoB also returned to Tanzania by
establishing a subsidiary in Dar-es-Salaam. BoB also opened a representative office each in Kuala Lumpur,
Malaysia, and Guangdong, China.
In 2005 BoB built a Global Data Centre (DC) in Mumbai for running its centralised banking solution (CBS)
and other applications in more than 1,900 branches across India and 20 other counties where the bank
operates. BoB also opened a representative office in Thailand.
In 2006 BoB established an Offshore Banking Unit (OBU) in Singapore.
In 2007, its centenary year, Bob’s total business crossed 2.09 trillion (short scale), its branches crossed 2000,
and its global customer base 29 million people. In Hong Kong, Bank got Full Fledged Banking license and
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In 2008 BoB opened a branch in Guangzhou, China (02/08/2008) and in Kenton, Harrow United Kingdom.
BoB opened a joint venture life insurance company with Andhra Bank and Legal & General (UK)
called India First Life Insurance Company.
In 2009 Bank of Baroda (New Zealand) was registered. As of 2017 BoB (NZ) has 3 branches: two in
Auckland, one in Wellington.
2010s
In 2010 Malaysia awarded a commercial banking licence to a locally incorporated bank to be jointly owned
by Bank of Baroda, Indian Overseas Bank and Andhra Bank.
In 2011 BoB opened an Electronic Banking Service Unit (EBSU) at Hamriyah Free Zone, Sharjah (UAE). It
also opened four new branches in existing operations in Uganda, Kenya (2), and Guyana. BoB closed its
representative office in Malaysia in anticipation of the opening of its consortium bank there. BoB received
'In Principle' approval for the upgrading of its representative office in Australia to a branch. Bob also
acquired Mumbai-based Memon Cooperative Bank, which had 225 employees and 15 branches in
Maharashtra and three in Gujarat. It had to suspend operations in May 2009 due to its precarious financial
condition.
The Malaysian consortium bank, India International Bank Malaysia (IIBM), finally opened in Kuala
Lumpur, which has a large population of Indians. BOB owns 40%, Andhra Bank owns 25%, and IOB the
remaining 35% of the share capital. IIBM seeks to open five branches within its first year of operations in
Malaysia, and intends to grow to 15 branches within the next three years.
On 17 September 2018, the government of India proposed the merger of Dena Bank and Vijaya Bank with
the Bank of Baroda, pending approval from the boards of the three banks, effectively creating the third
largest lender in the country.[11] The merger was approved by the Union Cabinet and the boards of the banks
on 2 January 2019. Under the terms of the merger, Dena Bank and Vijaya Bank shareholders received 110
and 402 equity shares of the Bank of Baroda, respectively, of face value ₹2 for every 1,000 shares they held.
The merger came into effect on 1 April 2019. Post-merger, the Bank of Baroda is the third largest bank in
India, after State Bank of India and HDFC Bank. The consolidated entity has over 9,500 branches, 13,400
ATMs, 85,000 employees and serves 120 million customers. [14] The amalgamation is the first-ever three-way
consolidation of banks in the country, with a combined business of Rs14.82 trillion (short scale), making it
the third largest bank after State Bank of India (SBI) and ICICI Bank. Post-merger effective 1 April 2019,
the bank has become the India's third largest lender behind SBI and ICICI Bank.
Bank of Baroda announced in May 2019 that it would either close or rationalise 800–900 branches to
increase operational efficiency and reduce duplication post-merger. The regional and zonal offices of the
merged companies would also be closed. PTI quoted an unnamed senior bank official as stating that Bank of
Baroda would look to expand in eastern India as it already had a strong presence in the other regions.
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Dena Bank
• Dena Bank was established on 26 May 1938 by Devkaran Nanjee ‘s family under the name of Devkaran
Nanjee Banking company Ltd.
• On December 1939, Dena Bank adopted its new name by Dena (Devkaran Nanjee) Bank due to become a
public company.
• Dena Bank Ltd was nationalized along with 13 other major banks and it becomes a Public Sector Bank on
July 1969.
• It has its headquarters in Mumbai Maharashtra
• On September 17, 2018 the Narendra Modi Government announced plans to merger three public sectors
banks Mumbai based Dena Bank. Bengaluru ‘s Vijaya Bank and the Bank of Baroda that has its head office
in Vadodara Gujarat.
• The merger entity legal asserts of over Rs 14 lakh crores, it will be India ‘s third largest lender behind the
State Bank of India and HDFC Bank.
• On 2 January 2019, the government of India approved the merger of Bank of Baroda with Vijaya Bank &
Dena Bank. Under the terms of the merger, for every 1000 shares of Dena Bank & Vijaya Bank shareholders
received 110 & 402 Bank of Baroda equity shares, respectively, of face value. Vijaya bank & Dena bank are
merger into Bank of Baroda from 1st April 2019.
• The government has agreed to grant some Rs 5,042 crore to Bank of Baroda to strengthen the merger
financial position.
• Due to the merger of Bank of Baroda its ranks second in India in terms of number of branches. The number
of banks kept under the prompt corrective action framework by the RBI to four.
• Dena bank is among the five PSU banks kept under PCA watch over burgeoning losses and NPAs. It is
based on the third quarter results of Dena bank & Vijaya bank, the key credit metrics of the merger entity,
with the exception of profitability, will be broadly similar to that of Bank of Baroda, according to a Moody
‘s report.
Amalgamation
On 17 September 2018, the Finance Ministry of the government of India proposed to merge three state run
banks — Vijaya Bank, Bank of Baroda, and Dena Bank — into a single bank. The amalgamated bank was
estimated to become the third biggest bank in India with a total business of more
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than ₹1,482,000,000,000 (equivalent to ₹1.7 trillion or US$21 billion in 2020). Some of the main stated
reasons for the merger were to help the weaker banks improve their operational efficiency, increase their
customer base and market reach, and to help them raise capital without depending on government funds at
all. Earlier that year, Dena Bank had been brought under the Prompt Corrective Action (PCA) framework
due to its high non-performing loans. At the time of the proposal to merge, the gross NPA ratios of Bank of
Baroda, Vijaya Bank and Dena Bank were 12.4%, 6.9% and 22% respectively, and Dena Bank was the
weakest among the three in terms of its total business size.
The Union Cabinet and the boards of the banks approved the merger on 2 January 2019. Under the terms of
the amalgamation, Dena Bank and Vijaya Bank shareholders received 110 and 402 equity shares of the Bank
of Baroda, respectively, of face value ₹2 for every 1,000 shares they held. The amalgamation became
effective from 1 April 2019.
Bank of Baroda announced that it would auction the Dena Corporate Centre (Dena Bank's head office) at
Bandra Kurla Complex, Mumbai in September 2019.
Procedure of Mergers & Acquisitions
Public announcement:
To make a public announcement an acquirer shall follow the following procedure:
1. Appointment of merchant banker: The acquirer shall appoint a merchant banker registered as category – I
with SEBI to advise him on the acquisition and to make a public announcement of offer on his behalf.
2. Use of media for announcement: Public announcement shall be made at least in one national English daily
one Hindi daily and one regional language daily newspaper of that place where the shares of that company
are listed and traded.
3. Timings of announcement: Public announcement should be made within four days of finalization of
negotiations or entering into any agreement or memorandum of understanding to acquire the shares or the
voting rights.
4. Contents of announcement: Public announcement of offer is mandatory as required under the SEBI Regulations.
1.4 What is merger?
• A merger is an agreement that unites two existing companies into one new company.
• Mergers are commonly done to expand a company’s reach, expand into new segments, or gain market
share.
• All of these are done to please shareholders and create value.
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• Merger is covered regulated/covered by the companies Act, 1856.
• Merger are been refers by finding an acceptable partners, determining upon how to pay each other and also
ultimately creating a new company, which is a combination of both the companies.
1.5 Types of Mergers
There are five commonly-referred to types of business combinations known as mergers: conglomerate
merger, horizontal merger, market extension merger, vertical merger and product extension merger. The
term chosen to describe the merger depends on the economic function, purpose of the business transaction
and relationship between the merging companies.
1) Conglomerate
A merger between firms that are involved in totally unrelated business activities. There are two types of
conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common,
while mixed conglomerate mergers involve firms that are looking for product extensions or market
extensions.
Example
A leading manufacturer of athletic shoes, merges with a soft drink firm. The resulting company is faced with
the same competition in each of its two markets after the merger as the individual firms were before the
merger. One example of a conglomerate merger was the merger between the Walt Disney Company and the
American Broadcasting Co
2) Horizontal Merger
A merger occurring between companies in the same industry. Horizontal merger is a business consolidation
that occurs between firms who operate in the same space, often as competitors offering the same good or
service. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher
and the synergies and potential gains in market share are much greater for merging firms in such an industry.
Example
A merger between Coca-Cola and the Pepsi beverage division, for example, would be horizontal in nature.
The goal of a horizontal merger is to create a new, larger organization with more market share. Because the
merging companies' business operations may be very similar, there may be opportunities to join certain
operations, such as manufacturing, and reduce costs.
3)Market Extension Mergers

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A market extension merger takes place between two companies that deal in the same products but in separate
markets. The main purpose of the market extension merger is to make sure that the merging companies can
get access to a bigger market and that ensures a bigger client base.
Example
A very good example of market extension merger is the acquisition of Eagle Bancshares Inc by the RBC
Centura. Eagle Bancshares is headquartered at Atlanta, Georgia and has 283 workers. It has almost 90,000
accounts and looks after assets worth US $1.1 billion.
Eagle Bancshares also holds the Tucker Federal Bank, which is one of the ten biggest banks in the
metropolitan Atlanta region as far as deposit market share is concerned. One of the major benefits of this
acquisition is that this acquisition enables the RBC to go ahead with its growth operations in the North
American market.
With the help of this acquisition RBC has got a chance to deal in the financial market of Atlanta , which is
among the leading upcoming financial markets in the USA. This move would allow RBC to diversify its
base of operations.
5) Product Extension Mergers
A product extension merger takes place between two business organizations that deal in products that are
related to each other and operate in the same market. The product extension merger allows the merging
companies to group together their products and get access to a bigger set of consumers. This ensures that
they earn higher profits.
Example
The acquisition of Mobilink Telecom Inc. by Broadcom is a proper example of product extension merger.
Broadcom deals in the manufacturing Bluetooth personal area network hardware systems and chips for IEEE
802.11b wireless LAN.
Mobilink Telecom Inc. deals in the manufacturing of product designs meant for handsets that are equipped
with the Global System for Mobile Communications technology. It is also in the process of being certified to
produce wireless networking chips that have high speed and General Packet Radio Service technology. It is
expected that the products of Mobilink Telecom Inc. would be complementing the wireless products of
Broadcom.
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4) Vertical Merger
A merger between two companies producing different goods or services for one specific finished product. A
vertical merger occurs when two or more firms, operating at different levels within an industry's supply
chain, merge operations. Most often the logic behind the merger is to increase synergies created by merging
firms that would be more efficient operating as one.
Example
A vertical merger joins two companies that may not compete with each other, but exist in the same supply
chain. An automobile company joining with a parts supplier would be an example of a vertical merger. Such
a deal would allow the automobile division to obtain better pricing on parts and have better control over the
manufacturing process. The parts division, in turn, would be guaranteed a steady stream of business.
Synergy, the idea that the value and performance of two companies combined will be greater than the sum of
the separate individual parts is one of the reasons companies’ mergers.
1.6 History of Merger
The Indian banking sector has witnessed a few mergers with the primary motive to ensure growth, expand
and diversify within the sector. For example, inter-alia, Punjab National Bank acquired New Bank of India
in 1993, Bank of Madura Ltd merged into ICICI Bank Ltd in 2001 and Bhartiya Mahila Bank merged into
State Bank of India in 2017. In August 2019, Government of India announced the -merger of 10 Public
Sector Banks (―PSBs‖) to 4. In accordance with RBI's press release dated 28th March 2020, the said
mergers were to take effect from 1st April, 2020.
ANCHOR BANK BANKS MERGED
Punjab National Bank United Bank of India and Oriental Bank of
Commerce
Indian Bank Allahabad Bank
Canara Bank Syndicate Bank
Union Bank of India Andhra Bank and Corporation Bank

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Bank of Baroda Dena Bank and Vijaya Bank
State Bank of India State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Bhartiya Mahila Bank
1. Bank of Baroda was merged with Vijaya Bank and Dena Bank. The merger took effect on 1 April 2019.
2. SBI's associate banks and Bhartiya Mahila Bank were merged with the State Bank of India in 2017.
1.7 Mergers and Acquisitions Benefits

Here are the top ten mergers and acquisitions benefits that you should know.
1. Economies of Scale
Often, the end goal of a merger and acquisition is to realize economic gains and economies of scale. This
becomes possible when the two firms involved in the merger and acquisition are stronger, more productive,
and more efficient together than apart. Businesses consolidate to reap benefits like increased access to
capital, better bargaining power in the market, lower costs resulting from high volume production, and more.
2. Economies of Scope
Mergers and acquisitions benefits include economy of scope, which refers to the reduction in production cost
of one product due to the production of another related product. In other words, one product supports another
to reduce the overall costs. Economies of scope typically occur when producing more products is more
feasible and economical than making a single or fewer products. Mergers and acquisitions can sometimes
lead to economies of scope that may be impossible to achieve through organic growth.
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3. Competitive Edge in the Market
Mergers and acquisitions mean greater financial strength for both companies involved in the transaction.
Having greater economic power can lead to higher market share, more influence over customers, and
reduced competitive threat. In most cases, bigger companies are harder to compete against.
4. Access to the Best Talent
Talent acquisition is one of the biggest concerns for companies that wish to excel in the market. The
recruitment industry knows that talented employees are attracted to big names. Consequently, the bigger the
company, the better access it enjoys to the best available talent. This trend is evident across industries from
manufacturing to technology and services.
5. Access to Resources
Businesses in the same sector can sometimes improve access to materials, suppliers, and tangible resources
through acquisition. For example, one business may acquire or merge with one of its suppliers to improve
production cycles and guarantee access to critical materials.
6. Diversification of Risk through Portfolio Divergence
Mergers and acquisitions allow companies to spread risk across different revenue streams by the
diversification of the products, services, and prospects for the business. If one revenue stream falls short, the
business will still have several other income streams to fall back on and continue operation. By
diversification of risk, the company can ensure sustainability for the long run.
7. Cost-Effective Alternatives for Facilities
Mergers and acquisitions present a cost-effective alternative to starting from scratch. Setting up production
centres, buying machinery and equipment, building storage places, and initiating distribution channels are
costly. It is more cost-effective to merge with another company already equipped with the facilities you
require. Furthermore, the transaction will also bring all the other merger and acquisition benefits that will
contribute to business success.
8. Access to New Markets
Breaking into a new market can be challenging, even for established businesses. While setting up a
subsidiary or branch is always an option, a merger or acquisition can save companies a significant amount of
time, effort, and money compared to starting from scratch.
This is especially true for businesses ready to move into a foreign geographical market. International
markets can be exceedingly difficult to penetrate. Therefore, it is more feasible for most companies to merge
with or acquire an established local business that already has a loyal customer base.
26
9. Opportunist Value Generation
Larger organizations are often on the lookout for acquisition opportunities where the purchase price is
valued at less than the fair market value of the target’s net assets. Such financial positioning indicates that
the target company is experiencing financial distress. In such cases, a merger or acquisition can allow the
acquired company to stay afloat, and the acquiring company to reap benefits such as proprietary rights to
products, increased market growth, penetration in new geographic regions, and more.
10. Enterprise Continuation
Some small businesses are family or privately owned. Once the founder retires, there is a risk of business
failure because there may not be a clear succession plan for the business. This can put employees out of
work and impact suppliers to the business. A merger or acquisition is one strategy to help ensure business
continuity, reduce interruptions in the operation, and provide job security for employees.
11. Expansion and Growth
M&A are the strategy for growth and expansion, in corporate jargon popularly known as an inorganic
growth strategy. Stagnation in this dynamic world is akin to being in coma. Thus, no company can afford to
stand still. Fulfilling growth objective ‘of an organization, M&As are considered as possible alternative. This
is also in consonance with public companies. The shareholders have invested their funds on the assumption
that their investment will not only provide adequate returns but also capital appreciation. Such appreciation
would be possible only when the organization keeps expanding.
12. Surplus of Liquidity
M&A can also occur due to surplus cash available with organizations. Deployment of such liquidity is a
question having multiple options. Investing such cash into existing organizations by way of acquisitions is a
worth considering option available with the CEOs. In recent times, it has been observed that cash-rich
companies prefer to use the cash for M&As rather than distribute it as extra dividends to shareholders. That
is why we see cash-rich firms making acquisitions more often even in unrelated industries. Such M&As also
result for stagnant industries merging their way into fresh woods and new pastures.
13. Tax Saving
Many mergers are motivated by the aim of achieving benefits and concessions under the Direct and Indirect
Tax laws. The benefits like carry forward of losses, deduction for infrastructure industry, export incentives
etc., can be utilized in a better manner by the combined entity.
14. Corporate Restructuring
27
SM&A also emerge due to corporate restructuring exercises. Group companies formulate schemes of
amalgamation among themselves as part of corporate restructuring. M&As also work as a turnaround
strategy for sick companies. Other Motives Besides the 9 points considered in the foregoing discussion there
could be other strategic reasons behind M&As. Companies do prefer acquisitions to create entry barriers for
others, merge themselves with friendly corporations to avoid unwanted acquisitions. Sometimes demerger
has to be implemented to comply with regulations like antitrust proceedings, Competition Act etc.
1.8 Procedure of Bank Merger
Public announcement:
To make a public announcement an acquirer shall follow the following procedure:
1. Appointment of merchant banker: The acquirer shall appoint a merchant banker registered as category
– I with SEBI to advise him on the acquisition and to make a public announcement of offer on his behalf.
2. Use of media for announcement: Public announcement shall be made at least in one national English
daily one Hindi daily and one regional language daily newspaper of that place where the shares of that
company are listed and traded.
3.Timings of announcement: Public announcement should be made within four days of finalization of
negotiations or entering into any agreement or memorandum of understanding to acquire the shares or the
voting rights.
4.Contents of announcement: Public announcement of offer is mandatory as required under the SEBI
Regulations.
 The procedure for merger either voluntary or otherwise is outlined in the respective state statutes/ the
Banking regulation Act. The Registrars, being the authorities vested with the responsibility of
administering the Acts, will be ensuring that the due process prescribed in the Statutes has been
complied with before they seek the approval of the RBI. They would also be ensuring compliance
with the statutory procedures for notifying the amalgamation after obtaining the sanction of the RBI.
 Before deciding on the merger, the authorized officials of the acquiring bank and the merging bank
sit together and discuss the procedural modalities and financial terms. After the conclusion of the
discussions, a scheme is prepared incorporating therein the all the details of both the banks and the
area terms and conditions.
28
 Once the scheme is finalized, it is tabled in the meeting of Board of directors of respective banks.
The board discusses the scheme thread bare and accords its approval if the proposal is found to be
financially viable and beneficial in long run.
 After the Board approval of the merger proposal, an extra ordinary general meeting of the
shareholders of the respective banks is convened to discuss the proposal and seek their approval.
 After the board approval of the merger proposal, a registered valuer is appointed to valuate both the
banks. The valuer valuates the banks on the basis of its share capital, market capital, assets and
liabilities, its reach and anticipated growth and sends its report to the respective banks.
 Once the valuation is accepted by the respective banks, they send the proposal along with all relevant
documents such as Board approval, shareholders’ approval, valuation report etc to Reserve Bank of
India and other regulatory bodies such Security & exchange board of India SEBI for their approval.
 After obtaining approvals from all the concerned institutions, authorized officials of both the banks
sit together and discuss and finalize share allocation proportion by the acquiring bank to the
shareholders of the merging bank SWAP ratio After completion of the above procedures, a merger
and acquisition agreement is signed by the bank
1.9 Guidelines for Merger or Amalgamation of Private Sector Banks
On April 21, 2016, the Reserve Bank of India (―RBI―) issued master directions streamlining the process
of mergers of private sector banks (―Guidelines―). The proposed merger of two banking companies or of a
banking company with a non-banking financial company is governed by these Guidelines. Additionally,
these Guidelines would be applicable to public sector banks, as appropriate.
According to the Guidelines, under the terms of Section 44A of the Banking Regulation Act of 1949, RBI
has the discretionary authority to authorize the voluntary merger of two banking entities.
These powers do not apply to the voluntary merger of a banking company with a nonbanking company,
which is governed by Sections 232 to 234 of the Companies Act of 2013, under which the National
Company Law Tribunal (―Tribunal‖) must approve the merger's plan.
Approval by board of directors
Boards of the banks play a vital role in the amalgamation process as the decision of amalgamation must be
ratified by two-third majority of the total board members and not just of those present and voting.
Amalgamation between two banking companies
According to Section 44A of the Banking Regulation Act of 1949, no banking company may merge with
another banking company unless a scheme outlining the terms of the merger has been presented in draft form
29
to the shareholders of each of the relevant banking companies separately and approved by a resolution
passed by a majority of the shareholders of each of the aforementioned companies present in person or by
proxy at a meeting of shareholders. 28 Prior to the shareholders' approval, the boards of directors of the
banking companies must accept the draft scheme. The following factors should be taken into account while
considering such approval:
1. The value of the proposed merged company's assets, liabilities, and reserves, and if the proposed
incorporation will result in an increase in the asset value;
2. The type of compensation the merging banking company will provide to the shareholders of the merged
company;
3. Whether the required amount of due diligence has been done with regard to the proposed merger;
4.Whether the swap ratio has been determined by independent valuers and whether such swap ratio is fair
and appropriate.
5. The shareholding structure of the two banking companies and if, as a result of the merger and the swap
ratio, any person's, entity's, or group's ownership of shares in the merged banking company will violate
RBI's policies;
6. The planned modifications to the board of directors' composition and whether the resulting membership of
the board would be in compliance with the RBI Guidelines; and
7. The impact on the viability and the capital adequacy ratio of the amalgamating banking company.
If such a scheme is adopted by the required number of shareholders, it must be presented to the RBI for
approval, which if granted, will be binding on the relevant banking companies.
Amalgamation of an NBFC with a banking company
In the event its proposed to merge an NBFC with a banking company, the banking company should procure
RBI's permission after its board has authorized the proposed merger but before it is filed to the Tribunal for
approval.
With respect to the approval of the scheme, in addition to the considerations listed above, the board should
also consider the following aspects:
1. Determine whether any RBI/SEBI regulations have been violated or are likely to be violated by the
NBFC, and if so, ensure that they are complied with, before the scheme is approved;
30
2. Whether ―Know Your Customer‖ norms are complied with by the NBFC for all its accounts which will
become accounts of the banking company;
3. Whether the NBFC has used credit facilities from banks or financial institutions, and if so, whether the
loan agreements require the NBFC to obtain the consent of the bank or financial institution concerned for the
proposed merger.
Information and documents to be furnished
Along with the application of scheme of amalgamation, following are few of the documents/ information
required to be submitted:
1. Draft scheme of amalgamation approved by the shareholders of the banking companies;
2. Certificates authorized by each of the officials present at the meeting of shareholders;
3. Certificates from the concerned officers of the banking companies listing the names of shareholders who
gave written notice to the banking company at or before the meeting that they opposed the amalgamation
plan, along with the amount of shares held by each shareholder;
4. Details of the proposed CEO of the banking company after amalgamation;
5. Annual reports of each of the banking companies for the three financial years preceding the date of such
amalgamation;
6. Such other information, documents or explanations as RBI may require during the application process.
RBI Guidelines on Mergers & Acquisitions of Banks
 With a view to facilitating consolidation and emergence of strong entities and providing an avenue
for non-disruptive exit of weak/unviable entities in the banking sector, it has been decided to frame
guidelines to encourage merger/amalgamation in the sector.
 Although the Banking Regulation Act, 1949 (AACS) does not empower Reserve Bank to formulate a
scheme with regard to merger and amalgamation of banks, the State Governments have incorporated
in their respective Acts a provision for obtaining prior sanction in writing, of RBI for an order, inter
alia, for sanctioning a scheme of amalgamation or reconstruction.
 The request for merger can emanate from banks registered under the same State Act or from banks
registered under the Multi State Co-operative Societies Act (Central Act) for takeover of a bank/s
registered under State Act. While the State Acts specifically provide for merger of co-operative
societies registered under them, the position with regard to take over of a co-operative bank
registered under the State Act by a co-operative bank registered under the CENTRAL
31
 Although there are no specific provisions in the State Acts or the Central Act for the merger of a co-
operative society under the State Acts with that under the Central Act, it is felt that, if all concerned
including administrators of the concerned Acts are agreeable to order merger/ amalgamation, RBI
may consider proposals on merits leaving the question of compliance with relevant statutes to the
administrators of the Acts. In other words, Reserve Bank will confine its examination only to
financial aspects and to the interests of depositors as well as the stability of the financial system
while considering such proposals.
1.10 Merger & Acquisition in The Indian Banking Sector
This research paper aims to analyse the behaviour of various mergers and acquisitions that have taken place
in the Indian Banking sector. Several International and Domestic banks are engaged in the process of
mergers and acquisitions. The principal objective to engage in this activity is to acquire the benefits of
economies of scale. It is one method of ensuring that a competitive force is set up to reckon with in the
international economy. Merging of the Indian banking sector through mergers and acquisitions on
commercial considerations and business strategies is a vital pre-requisite. In the present times, the banking
sector is a rapidly growing industry in India.
A comparatively new development in the Indian banking sector is enhanced through mergers and
acquisitions. It will permit banks to achieve a world class position and throw superior value to the
stakeholders. This paper will focus on the impact of merger on a company's stock and the effect on the
equity share of the shareholder's capital. It will also focus on the main factors affecting the performance of
the bank pre- and post-merger. The findings state that to a certain extent M&A's have been successful in
Indian banking sector. The paper also studies the State Bank of India and its Associates merger with the pros
and cons of the banks and the employees of the banks. The required data are collected from secondary
source.
Introduction
In today's fast-growing world mergers and acquisitions is an approach used by corporations for their growth,
extending their business to other dominions and to overcome financial struggle. The procedure of mergers
and acquisitions has received a substantial position in today's corporate world.
It can be observed that there are various recognized laws accessible in India on numerous modes of
corporate restructuring namely the Companies Act, 2013, the Securities 36 Contract Regulation Act, 1956,
the SEBI Act, 1992, the industries (Development & Regulation) Act, 1951, the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, State Bank of India Act,
1955 and the Banking Regulation Act, 1949
32
In the recent times, the trends of mergers and acquisitions in India have been altered. In several segments of
the economy, effects of the mergers and acquisitions have been diverse. Banking is the central pillar of the
economy. A main part of the banking sector in India is government-owned, though there are also private
minority shareholders in some of these banks. Banks are stimulated to gain global reach and better synergy
through bank mergers and also allow greater banks to obtain the stressed assets of smaller banks.
Abolition of competition between the banks is another aspect for bank mergers. By doing this considerable
amount of funds used for supporting competition can be used for the growth banking business. Sometimes, a
bank with a big bad debt portfolio and poor revenue will merge itself with another bank to seek backing for
survival. Merger in India between unviable banks should grow quicker so that the weak banks could be
reformed providing continuity of employment with the working force, operation of the assets blocked up in
the unviable banks and adding beneficially to the prosperity of the nation through increased flow of funds.
In the banking sector, important mergers and acquisitions in India in recent years include the merger
between IDBI (Industrial Development bank of India) and its own subsidiary IDBI Bank in 2004. The deal
was worth $ 174.6 million (Rs. 7.6 billion in Indian currency). Another important merger was that between
Centurion Bank and Bank of Punjab in 2005.[3] Worth $82.1 million (Rs. 3.6 billion in Indian currency),
this merger led to the creation of the Centurion Bank of Punjab with 235 branches indifferent regions of
India, another was acquisition of Centurion Bank of Punjab by HDFC Bank in 2008.
The economic environment is full of problem for the small and medium sized banks, due to superseded
technology, insufficiencies of resources, faltering marketing efforts and 37 weak financial structure. Their
existence becomes a question of doubt without new techniques and innovations and they have a threat from
the larger banks. Their restructuring through merger could offer a relief and help them to revive.
So far bank mergers have provided a protection to weak banks from closing down and failure. Smaller banks
fearing aggressive acquisition by a large bank sometimes enter into a merger to increase their market share
and protect themselves from the possible acquisition. Even RBI has taken initiative for the same and the
primary objective behind this move is to attain growth at the strategic level in terms of size and customer
base.
1.11 Reasons for M&As in Banks
The following are the reasons for the mergers in banks:
1. Merger of weaker banks the objective of combining weaker banks with stronger banks has been supported
in order to stabilize weak banks and diversify risk management. By joining forces with a more powerful
bank, the weaker ones can maintain its presence and avoid going out of business completely.
33
2. Synergies and Economies of scale Due to the synergies created by the combined client bases of the two
banks, the amalgamated product will be more profitable and provide improved customer satisfaction. The
merged bank will have superior business portfolio, risk management plans, and market capitalization. It also
benefits from economies of scale and lower costs through better utilization of available resources.
3. Financial liquidity and economies of scale A merger increases liquidity, ensures direct access to cash
resources, and assists in the disposition of surplus and obsolete assets. It aids to pool the resources of the
individual banks and use them in an effective and efficient manner. After the merger, the banks will be better
equipped to fund massive projects that they previously wouldn't be able to do so on their own, making the
funding procedure for those projects swift and simple.
4. Technology advancement with the advent of the internet, banks can now offer services with the touch of a
screen, allowing them to utilize the latest technologies. Through the merger, banks work together and make
use of cutting-edge technology to deliver better services and support the expansion of the banking industry.
5. Skill & Talent When two banks merge or are acquired by one another, staff and expertise are also
amalgamated, creating a larger talent pool that gives the merged entity an advantage over its competitors.
1.12 Challenges of Merger
―Presumably, most of the mergers amongst PVBs (private sector banks) were marketdriven and those
between PSBs (public sector banks) were government-led mergers. Our analysis suggests that the efficiency
trends between acquirers and their acquirees were consistent across ownership patterns, ‖ the authors said.
Therefore, singling out the government-led mergers alone as being aimed at accommodating weak banks
with stronger ones may not be correct, they added. The study ‘s findings suggest that the mean technical
efficiency of acquirers increased from 90.88 in the pre-merger period to 93.80 three years post-merger, and
94.24 five years post-merger. ―Relatively lower managerial and organisational competencies in acquired
banks were not a hindrance for preserving efficiency of the merged entity and the benefits to acquirers from
mergers on account of increased scale of productive capacity were statistically significant‖, the authors said.
A deep dive into factors that may have led to efficiency gains identifies post-merger geographical
diversification and improvement in the share of interest income as the significant factors, per the authors led
by Snehal S Herwadkar, Director, Department of Economic and Policy Research, RBI. An analysis of
cumulative abnormal returns one day prior and one day after the ‗news leak day ‘in the event study
framework for banks that merged during 2019-2020 suggested wealth gains for the shareholders of the
acquiree banks. ―This is not surprising in light of our earlier results that generally weak banks were
acquired by stronger banks. Thus, the markets viewed the news of merger positively for the acquiree banks,
34
In anticipation that their financials would strengthen after merger, ‖ the authors said. 51 The evidence so far,
thus, suggests that mergers have been an effective tool of efficiency improvement in the Indian banking
sector. Business strategies Mergers have provided avenues for increasing the scale of operations,
geographical diversification, and adoption of more efficient business strategies. Financial ratio analysis
suggests that while mergers led to improvement in acquirers ‘efficiency across most of the metrics, it was
most prominent for liquidity, capital adequacy, profitability and NPA provisions measures. Moreover, the
impact was sharper in the medium term (-3 to +5 years period) as compared to the short-term (-1 to +1 years
or -3 to +3 years period). Gains in liquidity indicators suggest that post-merger, the inter-mediation function
of the combined entity improved—banks were able to channelise higher share of deposits/assets into loans,
per the paper. Financial risks the improvement in capital adequacy and NPA provisions measures indicate
that post-merger, the combined entity has become relatively more resilient to financial risks.
The authors noted that improvement in profitability ratios may be indicative of economies of scale—post-
merger, banks may have been able to cut some operating costs by consolidating bank branches/ATMs
operating in the same area, etc. These gains were also complemented by improvement in operating
efficiency as well as asset quality indicators. The acquirers ‘financial performance improved post-merger
compared to pre-merger, even after adjusting for industry-wide influences, both in the short-term and
medium-term period
1.13 The Reasons for BoB Merger with Dena Bank
1) The number of public sector banks are very high: Before 2014 the number of public sector banks are 27.
that is 19 banks which are exclusively owned by government of India that is nationalized banks. A part From
that we have 1 State Bank of India, 5 associate banks of SBI,1 IDBI, and another entity was 1 Bhartiya
Mahila bank. So put together there are 27 public sector banks. Whichever angle u look at it the number of
public sector banks are very high.
2) Recapitalization need will come down: The requirement in terms of recapitalization for government of
India is also increasing. In the year 2014 the government of India announced that they will provide a
recapitalization of around 70,000 cr but in a span of 5 years that is through budgetary allocation. In the first
two years they allocated 25,000 cr and in the next two years they allocated 10,000 cr. So basically,
government of India said they will provide recapitalization till 2019. But over a period of time the
government of India is realised that this amount of 70,000 cr is not sufficient for the banking sector. As a
result of this last year itself the government of India has extended this particular idea of recapitalization from
70,000 cr to more than 2.1 lakh cr.
3) Regulatory burden will come down: It is becoming burned for RBI to regulate all the participants in the
banking sector. On one side RBI has to regulate differentiated banks, RBI has to regulate regional rural
35
banks, RBI has to regulate scheduled commercial banks which are private sector banks as well as public
sector banks. Since the number of banking units have kept on increasing the burden to regulate also has
increased on the shoulders of RBI. So, what if the number of banks under the public sector banks are
reduced the burden on the shoulders of RBI will also come down. So regulatory burden on RBI also will
come down.
4) The NPA’s are very high: The most important concern for the banking sector presently is non-performing
assets. The burden of non-performing assets is very high. The NPA’s as already mentioned will continue to
increase even in this particular financial year and when the NPA’s increases the burden on RBI the burden
on the government of India as well as the pressure on banks themselves will also increase. So basically, if
the public sector banks are reduced by the concept of either privatisation or mergers. The banks can use
economies of scale but essentially the banks will able to use economies of scale the assets will be pulled in
NPA’s to certain extent can be controlled.
5) The bank owns majority stake in the 21 PSBs. having said so these PSBs account for 90% of NPAs
6) 11 of these 21 are under one or the other scheme/program launched by RBI o Of 21 PSBs 19 are in losses
because of NPAs
7) The capital requirements of these banks are higher. This will exert pressure on the finances of the
government
8) Recommendations of Narasimhan committee - Three tier structure of the banks
 3 to 4 large banks
 8 to 10 National Banks
 Local banks and Rural Banks
1.14 Advantages & Disadvantages of Merger
Advantage
Mergers and takeovers are permanent form of combinations which vest in management complete control and
provide centralized administration which are not available in combinations of holding company and its
partly owned subsidiary. Shareholders in the selling company gain from the merger and takeovers as the
premium offered to induce acceptance of the merger or takeover offers much more price than the book value
of shares. Shareholders in the buying company gain in the long run with the growth of the company not only
due to synergy but also due to ―boots trapping earnings‖. Mergers and acquisitions are caused with the
support of shareholders, manager ‘s ad promoters of the combing companies. The factors, which motivate
36
the shareholders and managers to lend support to these combinations and the resultant consequences they
have to bear, are briefly noted below based on the research work by various scholars globally
(1) From the standpoint of shareholders
Investment made by shareholders in the companies subject to merger should enhance in value. The sale of
shares from one company’s shareholders to another and holding investment in shares should give rise to
greater values i.e. The opportunity gains in alternative investments. Shareholders may gain from merger in
different ways viz. From the gains and achievements of the company i.e. Through
(a) Realization of monopoly profits;
(b) Economies of scales;
(c) Diversification of product line;
(d) Acquisition of human assets and other resources not available otherwise;
(e) Better investment opportunity in combinations.
One or more features would generally be available in each merger where shareholders may have attraction
and favour merger.
(2) From the standpoint of managers
Managers are concerned with improving operations of the company, managing the affairs of the company
effectively for all round gains and growth of the company which will provide them better deals in raising
their status, perks and fringe benefits. Mergers where all these things are the guaranteed outcome get support
from the managers. At the same time, where managers have fear of displacement at the hands of new
management in amalgamated company and also resultant depreciation from the merger then support from
them becomes difficult.
(3) Promoter’s gains
Mergers do offer to company promoters the advantage of increasing the size of their company and the
financial structure and strength. They can convert a closely held and private limited company into a public
company without contributing much wealth and without losing control.
(4) Benefits to general public
Impact of mergers on general public could be viewed as aspect of benefits and costs to:
37
(a) Consumer of the product or services;
(b) Workers of the companies under combination;
(c) General public affected in general having not been user or consumer or the worker in the companies
under merger plan.
(a) Consumers
The economic gains realized from mergers are passed on to consumers in the form of lower prices and better
quality of the product which directly raise their standard of living and quality of life. The balance of benefits
in favour of consumers will depend upon the fact whether or not the mergers increase or decrease
competitive economic and productive activity which directly affects the degree of welfare of the consumers
through changes in price level, quality of products, after sales service, etc.
(b) Workers community
The merger or acquisition of a company by a conglomerate or other acquiring company may have the effect
on both the sides of increasing the welfare in the form of purchasing power and other miseries of life. Two
sides of the impact as discussed by the researchers and academicians are: firstly, mergers with cash payment
to shareholders provide opportunities for them to invest this money in other companies which will generate
further employment and growth to uplift of the economy in general. Secondly, any restrictions placed on
such mergers will decrease the growth and investment activity with corresponding decrease in employment.
Both workers and communities will suffer on lessening job Opportunities, preventing the distribution of
benefits resulting from diversification of production activity.
(c) General public
Mergers result into centralized concentration of power. Economic power is to be understood as the ability to
control prices and industries output as monopolists. Such monopolists affect social and political environment
to tilt everything in their favour to maintain their power ad expand their business empire. These advances
result into economic exploitation. But in a free economy a monopolist does not stay for a longer period as
other companies enter into the field to reap the benefits of higher prices set in by the monopolist. This
enforces competition in the market as consumers are free to substitute the alternative products. Therefore, it
is difficult to generalize that mergers affect the welfare of general public adversely or favourably. Every
merger of two or more companies has to be viewed from different angles in the business practices which
protects the interest of the shareholders in the merging company and also serves the national purpose to add
to the welfare of the employees, consumers and does not create hindrance in administration of the
Government police
38
Other Advantage of a Bank Merger
• A large capital base would help the acquirer banks to offer large loans amount.
• This merger makes RBI to have better control on the system and the implementation of policies will
became easy.
• It will be easy of penetration to the market.
• Technological up gradation can be considered.
• Recapitalization need from the government to reduce.
• The cost of operation is been reduce with the help of merger.
• The professional standard is been improve.
• It helps in improve the risk management.
• The geographically concentrated regionally present the banks to expand their coverage with the help of
merger.
• It provides better efficiency ratio for the business of operations as well as the banking operation which is
beneficial for the economy.
• Service delivery can be get improved with the help of merger.
• RBI will be watching banks on its performance, especially in the terms of NPA (Nonperforming Asset)
otherwise loans which are not recovered.
• Customers will have a wide range of products like mutual funds and insurance to choose from the
additional to the traditional loans and deposits.
• It NPA percentage of the bank is above prescribed norms, it will ask to merge with a bigger bank to the
case the situation as to combined capital of banks that will be higher and thereby reducing the NPA
percentage.
Disadvantage of a Bank Merger
• All different banks have different culture, systems, processes, procedures and that merger will lead to clash
of organizational cultures.
39
• Bank officials and unions of PSBs are against the merger due to the issues with the employment, security,
tenure, etc.
• There are few large inter-linked banks that can expose the broader economy to enhanced financial risks.
• Employees of the larger bank does not be give equal treatment to the employees of the smaller bank into
new and the merged bank.
• The local identity of small banks is not that big.
• There is materialized and that the customers feel harassed initially that the banks are working on it.
• It will take some time to the customers to know that their banks are merged. Even though it’s mandatory
for the banks to inform to their entire customer about the merger some customer may miss the
communication and get panic to see their branch board is replaced with the new one.
• Acquiring banks have to handle the burden of weaker banks, resulting in risk exposure.
• It is difficult to manage the culture and people of different banks.
• The idea of decentralization as many banks that have a regional audience to cater and customers often the
respond very emotionally to the banks acquisition.
1.15 Impact of Merger on Share & Performance
This research paper aims to analyse the behaviour of various mergers and acquisitions that have taken place
in the Indian Banking sector. Several International and Domestic banks are engaged in the process of
mergers and acquisitions. The principal objective to engage in this activity is to acquire the benefits of
economies of scale. It is one method of ensuring that a competitive force is set up to reckon with in the
international economy. Merging of the Indian banking sector through mergers and acquisitions on
commercial considerations and business strategies is a vital pre-requisite. In the present times, the banking
sector is a rapidly growing industry in India.
A comparatively new development in the Indian banking sector is enhanced through mergers and
acquisitions. It will permit banks to achieve a world class position and throw superior value to the
stakeholders. This paper will focus on the impact of merger on a company's stock and the effect on the
equity share of the shareholder's capital. It will also focus on the main factors affecting the performance of
the bank pre- and post-merger. The findings state that to a certain extent M&A's have been successful in
Indian banking sector. The paper also studies the State Bank of India and its Associates merger with the pros
and cons of the banks and the employees of the banks. The required data are collected from secondary
source.
40
In today's fast-growing world mergers and acquisitions is an approach used by corporations for their growth,
extending their business to other dominions and to overcome financial struggle. The procedure of mergers
and acquisitions has received a substantial position in today's corporate world.
It can be observed that there are various recognized laws accessible in India on numerous modes of
corporate restructuring namely the Companies Act, 2013, the Securities 36 Contract Regulation Act, 1956,
the SEBI Act, 1992, the industries (Development & Regulation) Act, 1951, the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, State Bank of India Act,
1955 and the Banking Regulation Act, 1949
In the recent times, the trends of mergers and acquisitions in India have been altered. In several segments of
the economy, effects of the mergers and acquisitions have been diverse. Banking is the central pillar of the
economy. A main part of the banking sector in India is government-owned, though there are also private
minority shareholders in some of these banks. Banks are stimulated to gain global reach and better synergy
through bank mergers and also allow greater banks to obtain the stressed assets of smaller banks.
Abolition of competition between the banks is another aspect for bank mergers. By doing this considerable
amount of funds used for supporting competition can be used for the growth banking business. Sometimes, a
bank with a big bad debt portfolio and poor revenue will merge itself with another bank to seek backing for
survival. Merger in India between unviable banks should grow quicker so that the weak banks could be
reformed providing continuity of employment with the working force, operation of the assets blocked up in
the unviable banks and adding beneficially to the prosperity of the nation through increased flow of funds.
In the banking sector, important mergers and acquisitions in India in recent years include the merger
between IDBI (Industrial Development bank of India) and its own subsidiary IDBI Bank in 2004. The deal
was worth $ 174.6 million (Rs. 7.6 billion in Indian currency). Another important merger was that between
Centurion Bank and Bank of Punjab in 2005.[3] Worth $82.1 million (Rs. 3.6 billion in Indian currency),
this merger led to the creation of the Centurion Bank of Punjab with 235 branches indifferent regions of
India, another was acquisition of Centurion Bank of Punjab by HDFC Bank in 2008.
The economic environment is full of problem for the small and medium sized banks, due to superseded
technology, insufficiencies of resources, faltering marketing efforts and 37 weak financial structure. Their
existence becomes a question of doubt without new techniques and innovations and they have a threat from
the larger banks. Their restructuring through merger could offer a relief and help them to revive. So far bank
mergers have provided a protection to weak banks from closing down and failure. Smaller banks fearing
aggressive acquisition by a large bank sometimes enter into a merger to increase their market share and
protect themselves from the possible acquisition. Even RBI has taken initiative for the same and the primary
objective behind this move is to attain growth at the strategic level in terms of size and customer base
41
42
Chapter 2
Research & Methodology
2.1 Objective
The following are objectives for the study: -
 To study the implications of Merger on the Bank of Baroda’s Operational Condition.

 To study the implications of Merger on the Bank of Baroda’s Financial Condition.
 To identify Reasons, Challenges and Benefits of Merger
 To Analysis of financial Performance of Bank of Baroda, Dena bank and Vijaya Bank
2.2 Significance of the study
The study is significant and useful as it has given the experience and knowledge about the merger and
acquisition in Indian banking sector and what are its impact on the financial performance of the bank
2.3 Scope of the study
 The research paper covers three important public sector banks, Bank of Baroda, Dena Bank and
Vijaya Bank only.
 This study limited the pre-merger five year’s financial data. Merger the affected bank performance
may improve after some years.
 This study is limited to the net profit, Earning per share and Total Assets
2.4 Sources of data collection
• The study is purely based on secondary data taken from the annual reports of selected units and other
websites.
• All the data related to history, growth and development of selected banking industries, it is been collected
mainly from the books and magazine related to the banks and published papers, reports, articles and from the
various newspapers, and other journals
2.5 Challenges in the Way of Process of Merging
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 Bank of Baroda, Dena and Vijaya Bank have their different types of technology for their operations after
merging it will create problem for management.
 Merging process is happening on the papers but in real it will create some problems for prior customers for
their works.
 Policies, Rules & Regulation and decision-making process are not same for Selected Banks.
 New role after the merger of Dena Bank and Vijay Bank with Bank of Baroda, new methods or work may
lead to loss or crackdown in the motivation of the employees.
 It is hard for the bank to retain their prior customers even after merging.
 To reform non-performing assets of Dena and Vijaya Bank is a big challenge for Bank of Baroda after
Merger
2.6 Dena Bank and Bank of Baroda Merger
Continuing its merger plan for public sector banks, the government has finally completed the mega-merger
of one weaker lender Dena Bank and anchor lender Vijaya Bank with a 111-year-old Bank of Baroda
(BOB). All these banks are different from each other, have different business operations, hold different
positions and have different experiences. This would be second biggest merger plan of centre, after largest
lender State Bank of India (SBI) acquisition with its own six associated banks. Dena Bank and Vijaya Bank
on their official website stated that the process of amalgamation promises to leverage the specific skills of
each bank and imbibe their best practices. This mega entity has the ability to do more and reach further to
fulfil customers with world-class offerings backed by robust processes.
While there won’t be much material change in BOB considering it is the acquirer, the implementation of
taking under Vijaya Bank and Dena Bank will be something to watch for. That said, even customers of
Vijaya Bank and Dena Bank will see changes in their way of carrying a financial transaction.
1) Number Of Public Sector Banks Will Come Down: By 2014 there are 27 public sector banks and
presently the number has been dragged down to 21 and with this particular merger this will further come
down to 19. The problem with the present structure of the public sector banks is these public sector banks
account for more than 90% of the total NPA’s in the banking sector and this is the very huge disadvantage or
huge burden on the public sector banks. As the NPA’s keeps increasing the financials of the banking sector
will be affected.
2) Regulatory Pressure will come Down: It is becoming burned for RBI to regulate all the participants in the
banking sector. On one side RBI has to regulate differentiated banks, RBI has to regulate regional rural
44
banks, RBI has to regulate scheduled commercial banks which are private sector banks as well as public
sector banks. Since the number of banking units have kept on increasing the burden to regulate also has
increased on the shoulders of RBI. So regulatory burden on RBI also will come down.
3) Recapitalisation Burden will come Down: The requirement in terms of recapitalisation for government of
India is also increasing. In the year 2014 the government of India announced that they will provide a
recapitalisation of around 70,000cr but in a span of 5 years that is through budgetary allocation. In the first
two years they allocated 25,000 cr and in the next two years they allocated 10,000 cr.
4) The Penetration/ Reach of These Banks will Increase: The three banks Vijaya bank is more dominant or
more present in southern India whereas Dena bank and Bank of Baroda are more present in the western
India. When merging these three entries the penetration of the new entity is going to increase across India.
And more importantly Bank of Baroda is considered to be more dominant in terms of FOREX earnings as
well as technology driven tools. These tools as well as the earnings in FOREX will benefit the new entity. So
basically, this type of merger will promote penetration or reach of these particular banks.
5) Dena Bank Will Be Pulled Out of Problem: As Dena bank is a weak bank. The NPA’s of Dena bank very
recently reported were 22% of total loans given by bank and it was put in prompt corrective action and RBI
has basically stated that Dena bank will not be allowed to lend in the market. So, what we have done is take
Dena bank merger it with the strong banks such as Vijaya bank and Bank of Baroda. As a result of this Dena
bank will be pulled out of this particular problem of very high NPA’s. The NPA’s of Dena bank were the 5th
largest in terms of the banking sector.
6) On September 17, 2018 the Narendra Modi Government announced plans to merger three public sectors
banks Mumbai based Dena Bank. Bengaluru’s Vijaya Bank and the Bank of Baroda that has its head office
in Vadodara Gujarat.
7) The merger entity legal asserts of over rs 14 lakh crores, it will be India’s third largest lender behind the
State Bank of India and HDFC Bank.
8) On 2 January 2019, the government of India approved the merger of Bank of Baroda with Vijaya Bank &
Dena Bank. Under the terms of the merger, for every 1000 shares of Dena Bank & Vijaya Bank shareholders
received 110 & 402 Bank of Baroda equity shares, respectively, of face value. Vijaya bank & Dena bank are
merger into Bank of Baroda from 1st April 2019.
9) The government has agreed to grant some Rs 5,042 crore to Bank of Baroda to strengthen the merger
financial position.
45
10) Due to the merger of Bank of Baroda its ranks second in India in terms of number of branches. The
number of banks kept under the prompt corrective action framework by the RBI to four.
11) Dena bank is among the five PSU banks kept under PCA watch over burgeoning losses and NPAs. It is
based on the third quarter results of Dena bank & Vijaya bank, the key credit metrics of the merger entity,
with the exception of profitability, will be broadly similar to that of Bank of Baroda, according to a Moody’s
report. It also predicts that Bank of Baroda’s profitability will be dragged down by the NPAs of the other
two banks. As per the market reports, cultural integration of the three banks is been likely to remain an
overhang on the bank’s nearby term performance. The back – end technology integration would, however to
be relatively smooth as all the three banks operate on the Finacle CBS platform.
12) The Bank of Baroda is set 7,000 crores as a capital.
13) The agenda of this merger was to reduce non-performing assert (NPA). At the time of the merger
proposal the gross NPA ratio of Bank of Baroda, Vijaya bank & Dena Bank were 12.4%, 6.9% & 22%
respectively. Before the merger of Bank of Baroda, the entity would 40% more deposits and 44% more
loans, but it would also have 70% more distribution. So, there would be more products and services
available to customers after merger. The total business of Bank of Baroda is expected to be more than Rs 15
trillion after merger. The sign of merger is expressing through this Financial Analysis
2.7 The Benefit of Merger on BoB with Dena Bank
1) As the three nationalized banks, Bank of Baroda NSE -0.12% Dena Bank and Vijaya Bank merged to
form the second largest public sector bank in the country, the unified management Monday said it would
benefit customers, as well as employees in a big way.
2) Vijaya Bank was founded in Karnataka's Dakshina Kannada district in 1931 by A B Shetty.
3) Dena Bank, named after its founder Devkaran Nanjee, came into being in 1938 in Mumbai.
4) The consolidated bank, which went into effect from Monday, will be the second largest public sector bank
in the country having wider geographical reach with 9,500 plus branches, the bank officials said.
5) It would have more than 13,400 Automated Teller Machines and above 85,000 employees to serve over
120 million customers, said the officials at a press conference here to share details about the merger.
6) "The 120+ million customers will experience superior banking services and benefit from wider product
range including cash management solution, supply chain financing, financial planning, wealth management,"
said Birendra Kumar, general manager of Bank of Baroda zonal office here.
7) Kumar added that the employees will benefit from the diverse opportunities.
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8) "The service conditions of the employees will not be impacted and the interests of employees will be fully
protected.
9) The best of HR practices adopted by each of the banks will be examined for adoption," Kumar said.
10) Bank of Baroda was established in July 20, 1908 in erstwhile Baroda, now known as Vadodara in
Gujarat.
2.8 Impact of the mergers
The merger, which saw 27 public sector banks consolidated and reduced to 12, had a principal objective to
establish next generation banks and achieve a trillion-dollar economy in the years to come. This merger
undoubtedly has positive and synergistic effects on the banking industry, which would have an impact on the
effectiveness, workforce, and clients of the banks.
The government's consolidation strategy aims to create larger banks that can compete with both domestic
and international financial institutions. Following the mergers, SBI currently has a 22% market share among
all banks, and PNB, the second-largest public-sector bank, has a market share of roughly 8%.
With the merger of Punjab National Bank, United Bank of India, and Oriental Bank of Commerce, the
country's second-largest nationalized bank in terms of revenue and branch network will be created. The
resulting synergy will yield a next-generation bank that is competitive on a global scale.
2.9 Problem of statement
The banking industry has been experiencing major Merger and Acquisition in the recent years, with the
number of global players emerging through successive Merger and Acquisition in the banking sectors. Only
in today’s tough environment will large organizations thrive. Government banks are in bad condition
following demonetization. A lot of government banks have incurred huge losses owing to bad loans, which
the lenders have not been willing to recover because they have ruined their company due to a range of
factors, including demonetization. They have been discussions of the closing of certain banks because, in
such a case, the general public may have withdrawn deposits from their accounts in a very risky
circumstance. So, instead of shutting certain banks, the government, in consultation with RBI, it has taken a
brave decision to merge banks through largescale economy operations. By merging many public sector
banks into few and with efficient resources development, banks can be reinforced with a focus on upgrading
services and revenues, optimum utilization of staff, cost efficiencies and reduced NPAs. Therefore, the study
is taken up
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2.10 Hypothesis:
One possible hypothesis for a comparative study of the merger of Bank of Baroda and Dena Bank could be:
"The merger of Bank of Baroda and Dena Bank is likely to result in operational synergies, cost efficiencies,
improved asset quality, and increased competitiveness, primarily driven by economies of scale,
complementary customer base, and shared technology and expertise."
This hypothesis could be further tested and analysed through various research methods, such as comparison
of financial statements of pre- and post-merger periods, assessment of customer satisfaction and loyalty,
evaluation of employee morale and productivity, identification of potential risks and challenges, and analysis
of regulatory and market factors that could impact the merger's success.
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Chapter 3
Literature Review
3.1 National Review
Sanjay Sharma & Sahil Sidana (2017) In this research paper it expressed the impact of SBI merger on
financial condition of SBI. The SBI will get visibility at global level in the network increase of SBI & it is
also able to provide cheaper funds more easily. The gross & net NPA of SBI it will come down after merger
with their associate. The efficiency & effectiveness of the business it will increase because of single
management.
Kotnal Jaya Shree (2016) In this research paper it expressed “the economic impact of merger and
acquisition on profitability of SBI” its various motives of merger in Indian Banking Industry. It was
compares pre- and post-merger financial performance of merging banks with the help of financial
parameters like gross profit margin, net profit margin, operating profit margin, return on equity and debt
equity ratio. Finally, it expresses that the banks have been affected positively but the overall development
and financial illness of the banks can’t be solved through mergers and acquisitions.
Prof. Ritesh Patel & Dr. Dharmesh Shah (2016) In this research paper it compared the financial
performance of before and after merger of banks through Economic value-added approach and through
others financial parameter like net profit margin, return on net worth, return on asserts, return on long term
funds, interest earned and total assets and it is not necessary that EVA approach is common for all the other
banks. They concluded that the financial performance of bank may be improved after the merger. But if it
past financial data are examined before merger, it can be making merger fruitful.
Parveen Kumari (2014) In this research paper it considered the merger and acquisition of banks as strategic
approach and told that the aim of the merger and acquisition of banks is increase credit creation and make
progressive. According to the gathered post-merger data she concluded that the number of branches & ATM,
Net Profit, Deposit, Net worth have increased.
S. Deva Rajappa (2012) This study is destined in identifying the various reasons for merger and
acquisitions in India. It also focused on pre- and post-merger performance of banks from the view point of
return on investment, ROCE, ROE. And this merger effects the helpful for serving of week banks by
merging into larger banks.
49
Ramon, A.A., Onaolapo and Ajala, O. Ayorinde (2012) In this research they examined the effects of
merger and acquisition on the performance of selected commercial banks in Nigeria. on the basis of gross
earning, profit after tax and deposit profit was chosen as financial efficiency parameters for the purpose of
the study. The findings indicated an enhanced financial performance leading to improved financial
efficiency. The 15 study is recommended that the banks should be more aggressive in marketing financial
products and also manpower training and re-training, investment in information technology should be
emphasized.
Azeem Ahmed Khan (2011) In this study, the researcher focused on explain the various motives for
mergers and acquisition in India. The results of this study witnessed that mergers and acquisitions helped in
declaration of dividends to equity shareholders.
Nisarg A Joshi and Jay M Desai in this study it measured the operating performance and shareholder value
of acquiring their performance before and after the merger. The ratio analysis is used on the basis of
operating profit margin, Gross operating margin, Net Profit Margin, return on capital employed, Return on
Net Worth, Debt-equity ratio, and EPS P/E for studying the impact. They also concluded the previous
studies; mergers do not improve performance at least in the immediate short term.
Bhan Akhil (2009) In this research paper its insight into the motives and benefits of the mergers in Indian
banking sector. This study examined eight merger deals of the Indian banks during the period of 1999 to
2006. The results of the study are indicated that mergers have been efficient for the merging banks and they
have also created a value for the acquiring banks. Further it was concluded that in the Indian Banking
context the effect of mergers is not seen over a short period of time but over a considerable period of time.
Kasliwal & Gupta (2021) examined that Indian banking sector needs to improve its corporate governance
and strategic management in global sectors through merger of small banks into Big Banks. This study
adopted secondary based data. conclusion of this research is through the process of merging. Banks can
strength their capital, profitability to increase its activities through the different types of Networks.
Adhana and Raghuvanshi (2020) studied that eighteen public sector bank business, deposits and non-
Performing assets (NPA). In their paper they carried out secondary based data. Conclusion of this paper after
the merger of selected Bank, the Big Bank would lead focus on international Market and the second middle
level banks would focus on the national market. The main object of this paper to know the impact of public
sector bank merger and customers are likely to be impacted. Conclusion of this paper after the merger of
selected Bank, the Big Bank would lead focus on international Market and the second middle level banks
would focus on the national market.
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Hinal and Divekar (2020) discussed Merger and Acquisition of Bob, Dena and Vijaya bank. Author
described merger and acquisition one of the most valuable instruments for growth. This study shows that the
effects of the world economy are therefore difficult for small bank for the survival of weak bank and they
need to support and this is the one of the reasons for their Merger.
Ashok Botta (2019) explained s the competitive advantage of mergers in banking sector with respect to
Bank of Baroda, Vijaya bank and Dena bank. Merger and acquisition in general term as a strategic tool for
the participants in merger activity for gaining certain synergies. The study focused on who have participated
in mergers for different reasons. Jenifer Piesse et. al (2013) analysed that merger and acquisition is a useful
organization strategy, used by corporate to achieve various object, and also acts as a mechanism for market
discipline. This paper analysis on merger motives, budgeting and payment methods, wealth increment, and
distribution between bidders’ and target shareholders and the impact of takeovers on the competitors of
predator and target organization.
Ali-Yrkko and Jyrki (2002) purposed of this paper is to compare the merger activity of Finland country
with other countries and set to benchmark or to set benchmarks in comparison to other countries. The
authors explained most of the cross-sectional and time-series variation of the merger and acquisition activity
in different countries can be explicated by using Gross domestic Product, market capitalization, and the
number of listed firms. In this paper, they adopt an eclectic model of the causes of merger and acquisition
and suggest that macro industrial and firm-level factors affect merger and acquisition.
Among the Indian Banks, the previous researchers have worked on the pre and post-merger evaluation of
performance, economies of scale, profitability, capital adequacy and expansion of business like venturing
into untapped areas. Few researches dealt with the perception of employees, shareholders, investors,
depositors and its effects.
Jesna Assis & Major Dr. U Abdul Khalam, in their article “Merger of Public Sector Banks in India in
2019; a Great Revolution in Indian Banking Industry, published in 2020 have defined Merger & Acquisition
as follows.
Merger and acquisition (M&A) are a transaction in which the ownership of companies or business
organizations or their operating entities is transferred or combined with other entities. As a method of
prudent management, merger & acquisition can allow enterprises to grow or downscale, and change the
nature of their business or competitive position.
Jesna Assis & Major Dr. U Abdul Khalam in their article published in 2020 stated that a major move that
is set to redefine India's banking space, the merger of 10 public sector banks into four has been announced
by the Finance Minister, Mrs. Nirmala Sitharaman. The merger plan includes the merger of Indian Bank
with Allahabad Bank; Oriental Bank of Commerce (OBC) and United Bank of India with Punjab National
51
Bank (PNB); Canara Bank with Syndicate Bank; Union Bank of India, Corporation Bank and Andhra Bank.
Besides this, the announcement of Central Government regarding the capital infusion of Rs. 55,000 crores
into the Public Sector Banks are noteworthy
3.2 International Review
The two important issues examined by several academic studies relating to bank mergers are: first, the
impact of mergers on operating performance and efficiency of banks and second, analysis of the impact of
mergers on market value of equity of both bidder and target banks. Berger et.al (1999) provides an excellent
literature review on both these issues. Hence in what follows we restrict the discussion to reviewing some of
the important studies.
The first issue identified above is the study of post-merger accounting profits, operating expenses, and
efficiency ratios relative to the pre-merger performance of the banks. Here the merger is assumed to improve
performance in terms of profitability by reducing costs or by increasing revenues.
Cornett and Tehranian (1992) and Spindit and Tarhan (1992) provided evidence for increase in post-merger
operating performance. But the studies of Berger and Humphrey (1992), Piloff (1996) and Berger (1997) do
not find any evidence in post-merger operating performance.
Berger and Humphrey (1994) reported that most studies that examined pre-merger and post-merger financial
ratios found no impact on operating cost and profit ratios. The reasons for the mixed evidence are: the lag
between completion of merger process and realization of benefits of mergers, selection of sample and the
methods adopted in financing the mergers. Further, financial ratios may be misleading indicators of
performance because they do not control for product mix 11 or input prices. On the other hand, they may
also confuse scale and scope efficiency gains with what is known as X-efficiency gains.
Recent studies have explicitly employed frontier X-efficiency methods to determine the X-efficiency
benefits of bank mergers. Most of the US based studies concluded that there is considerable potential for
cost efficiency benefits from bank mergers (since there exists substantial X-inefficiency in the industry),
―but the data show that on an average, such benefits were not realized by the US mergers of the 1980s‖
(Berger and Humphrey, 1994).
Some studies have also examined the potential benefits and scale economies of mergers. Landerman (2000)
explores potential diversification benefits to be had from banks merging with non-banking financial service
52
firms. Simulated mergers between US banks and non-bank financial service firms show that diversification
of banks into insurance business and securities brokerage are optimal for reducing the probability of
bankruptcy for bank holding companies.
Wheelock and Wilson (2004) find that expected merger activity in US banking is positively related to
management rating, bank size, competitive position and geographical location of banks and negatively
related to market concentration. Substantial gains from mergers are expected to come from cost savings
owing to economies of scale and scope.
In a survey of US studies, Berger and Humphrey (1994) concluded that the consensus view of the recent
scale economy literature is that the average cost curve has a relatively flat U-shape with only small banks
having the potential for scale efficiency gains and usually the measured economies are relatively small.
Studies on scope economies found no evidence of these economies. Based on the literature, Berger and
Humphrey (1994) conclude that ―synergies in joint products in banking are rather small. ‖ The second issue
identified above is the analysis of merger gains in terms of stock price performance of the bidder and target
banks on announcement of merger. A merger is 12 expected to create value if the combined value of the
bidder and target banks increases on the announcement of the merger.
Pilloff and Santomero (1997) conducted a survey of the empirical evidence and reported that most studies
fail to find a positive relationship between merger activity and gains in either performance or stockholder
wealth. But studies by Bharadwaj, Fraser and Furtado (1990), Cornett and Tehranian (1992), Hannan and
Wolkan (1989), Hawawini and Swary (1990), Neely (1987), and Trifts and Scanlon (1987) report a positive
reaction in the stock prices of target banks and a negative reaction in the stock prices of bidding banks to
merger announcements. A recent study on mergers of Malaysian banks shows that, forced mergers have
destroyed wealth of acquired banks (Chong et. al., 2006).
Again, the reasons for mixed evidence are many. A merger announcement also combines information on
financing of the merger. If the merger is financed by equity offerings it may be interpreted as overvaluation
of issuer. Hence, the negative announcement returns to bidding firm could be partly attributable to negative
signaling unrelated to the value created by the merger (Houston et. al., 2001).
Returns to bidder firms‟ shareholders are significantly greater in bank mergers financed with cash than in
mergers financed with stock (Houston and Ryngaert, 1997).
The other short coming of event study analysis of abnormal returns is that if a consolidation wave is going
on, mergers are largely anticipated by shareholders and stock market analysts. Potential candidates for
mergers are highlighted by the financial press and analysts. In such cases event study analysis of abnormal
returns may not capture positive gains associated with mergers.
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In sum, the international evidence does not provide strong evidence on merger benefits in the banking
industry. However, it may be useful to note that these findings from the academic literature usually conflict
with consultant studies which typically forecast considerable cost savings from mergers. Berger and
Humphrey (1994) suggest why most academic studies do not find cost gains from mergers whereas
consultants tend to advocate mergers
3.3 Case Studie
 Introduction to case
The government announced the amalgamation of three banks — Bank of Baroda, Vijaya Bank, and Dena
Bank — aimed at creating the country’s third largest bank with a business of Rs 14.82 lakh crore and over
9,600 branches across the country.
It has been recognized that having several banks that are majority-owned by the government, virtually doing
the same business, and competing for the same pie of customers wasn’t a sensible strategy. It also meant a
lower return on the capital employed by the government which has competing demands for funds, and
growing competition. The government and banking regulator RBI have also emphasized the changing face
of banking marked by technological changes; challenges to raising capital that the owner (the government)
has to provide periodically; the need for consolidation in the sector and putting an end to fragmentation.
On a standalone basis, Vijaya Bank had strength in the South while Bank of Baroda and Dena Bank had a
stronger base in Western India. That would mean wider access for both the proposed new entity and its
customers. From the governments and regulator’s point of view, the move will lead to a lower NPA (non-
performing assets) ratio for the new bank compared to the NPA ratios of 11.04 % for Dena Bank, 5.40 % for
Bank of Baroda and 4.10% for Vijaya Bank. What this could mean down the line is lower requirements of
capital from the government and also the ability of a large bank, like the one proposed, to lend more on the
strength of its higher capital base (12.25 %) and to expand the business, rather than being dragged down
because of weak financials and being forced not to lend.
 Bank of Baroda
Bank of Baroda (Bob) is an Indian multinational, public sector banking and financial services company. It is
owned by the Government of India and headquartered in Vadodara, Gujarat. It has a corporate office in
Mumbai, Maharashtra.
54
Based on 2017 data, it is ranked 1145 on the Forbes Global 2000 list. Bob has total assets in excess of ₹ 3.58
trillion (making it India’s 2nd biggest bank by assets), a network of 5538 branches in India and abroad, and
10441 ATMs as of July 2017.The government of India announced the merger of Bank of Baroda, Vijaya
Bank and Dena Bank on September 17, 2018 to create the country’s third-largest lender. The envisaged
amalgamation will be the first-ever three-way consolidation of banks in the country, with a combined
business of Rs 14.82 lakh crore, making it the third largest bank after the State Bank of India (SBI) and
ICICI Bank.
The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao Gaekwad III on 20 July 1908 in the
Princely State of Baroda, in Gujarat.[12] The bank, along with 13 other major commercial banks of India,
was nationalized on 19 July 1969, by the Government of India and has been designated as a profit-making
public sector undertaking (PSU). As many as 10 banks have been merged with Bank of Baroda during its
journey so far.
 Dena Bank
Dena Bank was founded on 26 May 1938 by the family of Devkaran Nanjee, under the name Devkaran
Nanjee Banking Company. It adopted its new name, Dena (Devkaran Nanjee) Bank, when it was
incorporated as a public company in December 1939.
In July 1969 the Government of India nationalized Dena Bank, along with thirteen other major banks. It is
now a Public Sector bank constituted under the Banking Companies (Acquisition & Transfer of
Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in addition to the
business of banking, the Bank can undertake other business as specified in Section 6 of the Banking
Regulations Act, 1949.
On 17 September 2018, The Finance Ministry of the Government of India proposed to merge three state-run
banks — Vijaya Bank, Bank of Baroda, and Dena Bank — into a single bank. The amalgamated bank is to
become the third biggest bank in India with a total business of more than ₹1,482,000,000,000 (US$21
billion). The boards of the three banks are to meet to consider the proposal.[9] The agenda behind the merger
of the banks is to lower non-performing assets. The Gross NPA OF the Bank of Baroda, Vijaya Bank, and
Dena Bank is 12.4%, 6.9% and 22% respectively. The Dena Bank is currently operating under the Prompt
Corrective Action (PCA) framework due to non-performing loans.
 Vijaya Bank
Vijaya Bank is a public sector bank with its corporate office in Bengaluru, Karnataka, India. It is one of the
nationalized banks in India. The bank offers a wide range of financial products and services to customers
55
through its various delivery channels. The bank has a network of 2031 branches (as of March 2017)
throughout the country and over 4000 customer touchpoints including 2001 ATMs.
Vijaya Bank was established by a group of farmers led by A. B. Shetty on 23 October 1931[7] in Mangalore
in Dakshina Kannada District of Karnataka State. Since it was established on the auspicious Vijayadashami
Day, it was named ‘Vijaya Bank’.
During the economic chaos created by the Great Depression of 1927–30, Shetty approached leading Bunt
personalities to start a bank with the objective of extending credit facilities at a lower rate of interest to
enable the farmers to cultivate their lands and prevent them from falling into the clutches of money lenders.
Accordingly, Shetty involved 14 Bunts and established Vijaya Bank on 23 October 1931. In the beginning,
the bank had an authorized capital of ₹5 lakh and an issued capital of ₹2 lakh. The paid-up capital was
₹8,670.
 Share Ratio in Merger
The share swap ratio of a three-way bank merger of Dena Bank and Vijaya Bank with Bank of Baroda (Bob)
was announced on Tuesday, as they took a step closer to becoming the third-largest lender in India. Bob, the
largest of the three banks, on Wednesday, said that shareholders of Vijaya Bank and Dena Bank could get
402 and 110 equity shares of Bob for every 1,000 shares they held.
The share swap ratio will hurt Dena Bank shareholders the most as they lose ₹ 4.80 per share because of the
merger, followed by Vijaya Bank shareholders, who will lose ₹ 3 per share. The calculations are based on
the closing market price on Wednesday. While Bob closed at ₹119.4 per share, Vijaya Bank and Dena Bank
closed at ₹ 51.05 and ₹ 17.95, respectively.
The government owns 68.77% of Vijaya Bank, 80.74% of Dena Bank, and 63.74% of Bank of Baroda
Foreign portfolio investors. (FPIs) hold 1.29% in Dena Bank, 4.91% in Vijaya Bank, and 10.35% in Bob.
After the merger, the government will own 65.74% of the merged entity.
The share swap ratio is negative for both Vijaya Bank and Dena Bank. There could be a marginal negative
reaction to both the stock prices now. On a net worth basis, it is more a negative ratio for Vijaya Bank,’ a
banking analyst said on condition of anonymity. “Also, the share swap ratio for Vijaya Bank is lower than
street estimates. However, it is definitely beneficial for the Bank of Baroda.’
 Problem statement
The primary objective of this amalgamation is aimed at improving the customer base, consolidating the
public-sector banking, and enabling the merged entity to compete at the global banking level. Amongst all
56
the highlights, the deal is also likely to face certain hurdles in relation to its implementation process,
employee retention, etc. Further, it will also have to integrate data of more than 100 million customers as
well. With such a mammoth task at hand, the implementation phase of the merger may pose, for some, initial
teething issues for the merged bank and the government. Further, multiple nationwide strikes have been
organized by bank employee associations such as All India Bank Officers’ Confederation (AIBOC), All
India Bank Employees Association (AIBEA), and Bank Employees Federation of India (BEFI).
A written petition is also pending with the Delhi high court, challenging the merger and alleging violations
of banking regulations. Amidst such opposition, the finance minister and have recently asserted that pursuant
to the merger, there will be no retrenchment and there will be no impact on the service conditions of the
employees as well. The sporadic strikes are not only affecting the smooth operational functioning of the
banks but are also impacting other industries as well. However, in light of the government’s assurances, the
fate of such opposition needs to be seen. This amalgamation will present the Bank of Baroda as the global
conglomerate in the banking sector aiming to achieve higher working efficiency, financial stability, and
wider operationality. It will not only facilitate national and global outreach but will also integrate the public
banking sector in India. Having said that, the realization of such an aim — the success and the efficacy of
the consolidation will largely be contingent on the effective and smooth implementation of the merger.
 Alternatives / Solution
Such massive consolidation is also expected to reduce the lending cost, the number of NPAs and increase the
merged bank’s operational stability and profitability. The central government had, previously in 2017 as
well, merged six banks into the State Bank of India, making it the largest banking conglomerate.
Post-consolidation, the Bank of Baroda will have a business of around Rs 15.4 trillion and advances and
deposits market share of 6.9% and 7.4%, respectively. Further, considering the regional widespread presence
of Vijaya Banka and Dena Bank, the Bank of Baroda will have pan India presence.
Dena Bank’s strength lies in its relatively higher access to low-cost current account saving account (CASA)
deposits, while Vijaya Bank has good profitability and availability of capital for growth. Extensive reach and
global network and offerings of Bob will translate into advantages in terms of market reach, operational
efficiencies and the ability to support a wider offering of products and services, the statement says.
Every permanent and regular officer or employee of Vijaya Bank and Dena Bank will become an officer or
employee and will hold his office or service in Bob such that the pay and allowance offered to the employees
and officers of both the merging lenders should not be less favourable as compared to what they would have
drawn in the current employer banks.
57
 Challenges
The task at hand for the three men is a monstrous proposition. In any merger, the biggest challenge is that of
personnel. While in the private sector, the easiest action for the management is to lay off people to derive
cost savings that option does not exist for the three CEOs. There are 90,000 staff whose future has to be
protected and concerns addressed. Integration of technology platforms and cultures of these organizations.
Aligning the distribution of professionals in the merged bank and handling of human resources. As issues on
seniority are structured and important in a public sector set-up, ensuring that there is harmony would be a
challenge.
Rationalization of physical infrastructure. Dena Bank came under prompt corrective action of the RBI in
May 2017 in view of its high Net NPA and negative RoA (return on assets). Bank of Baroda is the largest
among the three and will take a hit on its asset quality. The other challenge is customer retention which we
saw in SBI’s recent merger with its associate banks. For the banking system as a whole, things cannot
change as the capital remains unchanged. The quantum of Gross NPA (GNPA) cannot change and will still
have to be addressed. Mergers are not the panacea in the context of PSBs.
58
Chapter 4
Data Analysis & Interpretation
4.1. Operation Analysis of Merger
The operational performance of Bank of Baroda after the merger are analysed as follow:
Q1) what was the no. of Branches & ATMs Before Merger and After Merger?
The operational performance of Bank of

Baroda after the
merger are analysed as follow
Baroda after the
merger are analysed as follow
Baroda after the
merger are analysed as follThe operational performance of Bank of
Baroda after the merger are analyzed as follow:
No. of Branches No. of ATMs
5553 9572 Before Merger
9482 13193 After Merger
59
Pre-Merger & Post Merger Branches & ATMs of BoB
14000
12000
10000
8000
6000
4000
2000
0
No. of Branches No. of ATMs
Series1 Series2 Series3
Interpretation
The standalone branches of Bank of Baroda were 5,553 before merger i.e., on 31st March 2019. Vijaya
Bank and Dena Bank had 2,119 branches and 1,775 branches respectively. Hence the number of branches of
Bank of Baroda is reached to 9,447 after merger on 1st April 2019. After one year of Merger, the number of
branches is increased to 9,482 at the end of 31st March 2020. The standalone ATMs of Bank of Baroda
were 9,572 before merger i.e., on 31st March 2019. Vijaya Bank had
2,163 ATMs and Dena Bank had 1,513 ATMs. Hence the number of ATMs of Bank of Baroda is reached
to 13,248 after merger on 1st April 2019. At the end of first year of Merger, ATMs are reached to 13,193.
After the end of First year of Merger 3929 branches and 3621 ATMs of Bank of Baroda are increased i.e.,
70.75% branches and 37.83 % ATMs respectively.
Q.2) What was the No. of Employee Before Merger & After Merger?
No. of Employee
Before Merger 55754
After Merger 84283
60
Pre-Merger & Post-Merger No. of Employee
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Before Merger After Merger
Interpretation
The numbers of employees of Bank of Baroda, Vijaya Bank, and Dena Bank as on March 31, 2019 were
55,754,
15,882 and 13,334 respectively. As on March 31, 2019, the total number of employees of all three banks was
84,970. But due to
retirement and VRS scheme the total numbers of employees on 31st March 2020 were 84,283 after merger.
The total numbers of employees are increased by 28,529 in number and 51.17% in percentage. Government
officials said that there is no retrenchment due to merger
Q.3) How Many customers was they’re Before Merger & After Merger?
No. of Customers
Before Merger 86100000
After Merger 131000000
61
Pre-Merger & Post Merger Of Customer of BoB
140000000
120000000
100000000
80000000
60000000
40000000
20000000
0
Interpretation
On March 31, 2019 the number of customers of Bank of Baroda, Vijaya Bank, Dena Bank as were 8.61
crore, 2.50 crore and 1.72 crore respectively. As on March 31, 2019, the total numbers of customers of all
three banks were 12.83 crore. On 1st April 2019 after merger, the total number of customers banks was
12.53 crore because nearly 30 lakh customers had account in more than one bank. On 31st March 2020 the
number of customers are increased to 13.10 crore. The total numbers of customers are increased by 4.49
crore from 1st April to 31st March 2020 i.e., 52.15 % in percentage.
4.2 Financial Analysis of Merger

The pre-merger and post-merger financial performance and financial position of Bank of Baroda is analyzed
as follow:
Q.1) What was the amount of Advance & Deposit Before Merger & After Merger?
Advance Deposit
468818.7 638689.7 Before Merger
62
690120.7 945985.4 After Merger
Pre-Merger & Post-Merger Deposite and Advances of BoB

1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
1 2
Advance Deposite Series3
Interpretation
On March 31, 2019 the Deposits of Bank of Baroda were Rs. 6,38,689.7 Crore, Deposits of Vijaya Bank
were Rs. 1,75,817 crore and Deposits of Dena Bank were Rs. 100,652 Crore. In which the Bank of Baroda’s
share was 69.79%. On 1st April 2019 after merger, the total consolidated Deposits of Bank of Baroda was
Rs.9,15,159 crore. But at the end of one year of Merger, Deposits are increased to Rs. 945985.4 Crore. If
pre-merger and post-merger Deposits ate compared then it is found that Deposits are increased by Rs.
307295.7crore i.e., by 48.11%. The Advances of Bank of Baroda were Rs. 4,68,818.7 Crore, Advances of
Vijaya Bank were Rs. 1,30,606 Crore and Advances of Dena Bank were Rs. 51,959 Crore on March 31,
2019. In which the Bank of Baroda’s share was 71.97%. On 1st April 2019 after merger, the total
consolidated Advances of Bank of Baroda was Rs.6,51,384 Crore. On 31st March 2020, Advances are
increased to Rs.6,33,181 Crore. If Advances are compared pre-merger and post-merger then it is found that
Advances are increased by Rs. 2,21,302 Crore i.e., 47.20% only.
Q.2) What was Operating Income & Operating Expenses Before Merger and After merger?
Operating Income Operating Expenses
24774.2 11287.9 Before Merger
37768.6 18077.2 After Merger
63
Pre-Merger & Post-Merger Analysis of Income & Expenditure of
BoB
40000
35000
30000
25000
20000
15000
10000
5000
0
1 2
Operating Income Operating Expenses Series3
Interpretation
On 31st March 2019, the consolidated Operating Income of Bank of Baroda was Rs. 24,774.2 Crore and
Operating Expense was Rs. 11,287.9 Crore. After the end of one year of Merger, Operating Income and
Operating Expenses are increased up to Rs. 37,768.6 Crore and Rs. 18,077.2 Crore
respectively. If post-merger performance is analyzed then Operating Income is increased by Rs. 12,994.4
Crore i.e., 52.45% and Operating Expenses is increased by Rs 6,789.3 Crore i.e., 60.15%.
64
Q.3) What was the Operating Profit & Net Profit Before Merger And After Merger?
Operating
Gross NPAProfit Net Profit
Net NPA
13486.8 433.5 Before Merger

48233 15609 Before Merger
19691.4 546.2 After Merger

69381 21577 After Merger
Pre-Merger & Post-Merger Operating Profit and Net Profit of Bob

25000
20000
15000
10000
5000
0
1 2
Operating Profit Net Profit Series3
Interpretation
On 31st March, 2019, before merger the standalone operating profit was Rs. 13,486.8 Crore and after the
merger of one year, the Operating Profit of Bank of Baroda was Rs. 19,691.4 Crore. Bank occurs the Pre-
Merger Net Profit of Rs.
433.5 Crore. Post-Merger Net Profit of Bank is Rs. 546.2 Crore. If post-merger performance is analyzed
then Operating Profit is increased by Rs. 6,204.6 Crore i.e., 46% and Net Profit is increased by Rs. 112.70
Crore i.e., 26%.
Q.4) What was Gross NPA & Net NPA Before Merger and After Merger?
65
Pre-Merger & Post-Merger NPA Of BoB
80000
70000
60000
50000
40000
30000
20000
10000
0
1 2
Gross NPA Net NPA Series3
Interpretation
Non-Performing Assets (NPA) of Bank of Baroda is increased after post-Merger, it is found that Gross NPA
is increased from Rs. 48,233 Crore to Rs. 69,381 Crore. Net NPA is increased from Rs. 15,609 Crore to Rs.
21,577 Crore at the
end of first year of Merger. Gross NPA and Net NPA are enhanced by Rs. 21,148 Crore and Rs. 5,968
Crore i.e., 43.85% and 38.23% respectively.
66
Q.5) What was the Status of Capital Before Merger and After Merger?

Share capital 5303644 9253745
Share Application Monay Pending Allotment 50420000 0
Reserve & Surplus 494237556 751789234
Minority Interest 3413648 3861746
Deposit 665588685 973228149
Borrowings 688675317 298782427
Other Liabilities & Provision 957526987 544708156
Pre-Merger & Post Merger Analysis of Capital and Liabilities of BoB

1200000000
1000000000
800000000
600000000
400000000
200000000
0
ita
l t us st e gs n
p en rpl tre osit in isio
ca tm Su In ep ro
w ov
ar
e llo & rit
y D o r Pr
h A e io B
S in
g
e rv in ies&
d s M t
Pe
n
Re ili
ai b
ay L
on er
M th
n O
atio
lic
pp
A
are
Sh
Interpretation
Share Capital of Bank of Baroda are increased by Rs. 3,950,101 thousand from Pre-Merger to Post-Merger
Period. Reserve and Surplus is increased by Rs. 257,551,678 thousand i.e., 52.11%. Deposits are increased
by Rs. 3,076,394,638 thousand in Post-Merger Period. Borrowings and Other Liabilities and Provisions are
increased by Rs.
268,851,670 thousand and Rs. 245,925,729 thousand after Pre-Merger Period. That is Share Capital,
Reserve and Surplus, Deposits, Borrowings and Other Liabilities & Provisions are increased by 74.48%,
52.11%., 46.22%, 39.04% and 82.31% respectively. Ultimately, Total Capital and Liabilities are
increased by Rs. 3,802,701,914 thousand i.e., by 46.39%.
67
Q.6) What was the status of Assets Before Merger and After Merger?

Cash & Cash Balance with RBI 2822534 3424478
B.W.B, M.A.C, & S.N, 6965949 9676029
Investments 1957162 2897267
Loan & Advances 4842148 7065397
Fixed Assets 7143707 9043784
Other Assets 3448843 6340291
Goodwill on consolidation 2239076 2239076
Pre-Merger & Post-Mergere Analysis of Assets

12000000
10000000
8000000
6000000
4000000
2000000
0
I ts
RB N
,
en ce
s ets ets tio
n
S. an ss ss a
ith , & estm dv d
A
er
A
ol
id
ew .C In
v A ixe th n s
n c .A & F O co
ala an on
B ,M L o
ill
sh .B
Ca .W dw
& B oo
G
sh
Ca
Interpretation
Cash and Balances with Reserve Bank of India is increased by Rs. 60,194,356 thousand in percentage
21.33% due to Merger. An investment is increased by Rs. 940,104,826Thousand i.e., by 48.03%. Loans &
Advances given is increased by value Rs. 2,223,249,179 thousand and volume by 45.91%. Fixed Assets is
increased by Rs. 19,000,771 thousand i.e., by 26.60%. Other Assets is increased by Rs. 289,144,808
thousand i.e., by 83.84%. But Balance with other bank, Money at Call & Short Notice is increased by Rs.
271,007,974 thousand i.e., by 38.90%. Overall, Assets are enhanced by Rs. 3,802,701,914 i.e., 46.39%.
increased from 8.61 Crore to 13.10 Crore i.e., 52.15 %. The numbers of Branches, regional and zonal
offices, ATMs are increased. Bank of Baroda had either close or rationalise branches to increase operational
efficiency and reduce duplication due post-merger. Liabilities and Assets are enhanced by 46.39% due to
Merger. Deposits and Borrowings are increased by 46.22% and 39.04%. Investment and Loans & Advances
are increased by 48.03% and 45.91%.
68
4.3 Ratio Analysis
1) EPS of Bank of Baroda
Earnings per share value is calculated as net income (also known as profits or earnings) divided by
available shares. A more refined calculation adjusts the numerator and denominator for shares that could be
created through options, convertible debt, or warrants. The numerator of the equation is also more relevant
if it is adjusted for continuing operations.
To calculate a company's EPS, the balance sheet and income statement are used to find the period-end
number of common shares, dividends paid on preferred stock (if any), and the net income or earnings. It is
more accurate to use a weighted average number of common shares over the reporting term because the
number of shares can change over time.
Table No: 1 Calculation of financial performance of BOB

Year 2018 2017 2016 2015 2014
Net profits -2431.81 1383.14 -5395.54 3398.44 4541.08
EPS -9.71 6 -23.89 15.83 107.38
Total 719999.77 694875.41 671376.48 714988.55 659504.53

assets/liabilities
Interpretation
 In the above table the net profit is high in 2014 later it increased to 3398.44 in 2015 later it is
decreased to -5395.54 in 2106 again it slightly increased to 1383.14 in 2017 and then decreased to -
2431.81 in 2018.
 EPS is high in 2014 again it slightly increased to 15.83 in 2015 and again it slightly decreased to -
23.89 in 2016 later it is increased to 6.00 in 2017 and later it is decreased to -9.71 in 2018.
 Total assets or liabilities are low in 2014 it slowly increased in 2015 again it decreased in 2016 later it
increased in 2017 and then increased in 2018 also.
69
800000
700000
600000
500000
400000
300000
200000
100000
0
1 2 3 4 5
-100000
Year Net profits

EPS Total assets/liabilities
2 EPS of Dena Bank

Table No: 2 Calculation of financial performance of Dena bank
Year 2018 2017 2016 2015 2014

Net profits -1923.15 -863.62 -935.32 265.48 551.66
EPS -18.06 -11.89 -15.5 4.94 14.4

Total 120859.79 129530.52 133441.64 129920.55 124863.49
assets/liabilities
Interpretation
 In the above table the net profit is high in 2014 later it decreased to 265.48 in 2015 later it is decreased
to -935.32 in 2106 again it slightly decreased to -863.62 in 2017 and then decreased to -1923.15 in
2018.
 EPS is high in 2014 again it slightly decreased to 4.94 in 2015 and again it slightly decreased to -
15.5 in 2016 later it is decreased to -11.89 in 2017 and later it is decreased to -18.06 in 2018.
 Total assets or liabilities are low in 2014 it slowly increased in 2015 again it increased in 2016 later it
decreased in 2017 and then decreased in 2018 also.
70
160000
140000
120000
100000
80000
60000
40000
20000
0
2018 2017 2016 2015 2014
-20000
Net profits EPS Total assets/liabilities
Other Ratio
Bank of Baroda
Ratio 2018 2017 2016 2015 2014 2013 2012

Net Profit Margin -5.57 3.27 -12.24 7.91 7.91 12.73 16.87
Operating Profit Margin -20.82 -12.73 -23.59 -2.33 0.20 2.41 5.34
Return on Assets (ROA) -0.33 0.19 -0.80 0.47 0.68 0.81 1.11
Return on Equity (ROE) -5.60 3.43 -13.42 8.53 12.61 14.01 18.22
Debt Equity Ratio (Pure Ratio) 15.07 15.69 15.11 16.39 15.65 15.65 14.87
Net Profit per Employee Ratio (in -4.42 2.64 -10.37 6.88 9.87 10.39 11.87
Lacs)
Gross NPA Ratio 13.21 11.15 10.56 3.80 2.99 2.43 1.55
Net NPA Ratio 5.49 4.72 4.96 1.89 1.52 1.28 0.54
Capital Adequacy Ratio 12.13 13.17 13.17 12.60 12.28 13.30 14.67
Interpretation
From the above data, we may observe that the Net Profit Margin of Bank of Baroda has seen sudden fall
in 2016 and 2018 as well. This is in relation with the increased provisioning for loans and other
contingencies, which may be observed by analyzing the P & L statement. However, we may observe
overall downward trend in the Net Profit Margin of Bank of Baroda from 2012 to 2018.
71
We observe a downward trend of Operating Profit Margin of Bank of Baroda from 2012-2018. Operating
profit margin does not include the addition of other income. Due to this, the downward trend is observed
to be more exponential as compared to Net Profit Margin.
Return on Assets of Bank of Baroda from 2012 to 2018 is on a downward trend with sudden decline in
2016 and 2018. This implies that the profit reaped by utilizing the assets is deteriorating. This is due to the
increased provisioning for loans and other contingencies, which may be observed by analyzing the P & L
statement.
Similar trend is observed in the case of Return on Equity as well. The common parameter effecting the
profitability may be seen as the spike in provisioning during 2016 and 2018. The expenses see no sudden
increase though. The D/E ratio is observed to be hovering around 15.5 with remarkable difference from
2012 to 2018. The downward trend in this parameter is due to the declining Net Profit caused due to
sudden increase of provisioning for loans and other contingencies.
Data depicts the trend of Gross NPA and Net NPA of Bank of Baroda from 2012 to 2018. It may be
observed that both the Gross and Net NPAs of the bank are increasing with a sudden jump in 2016. From
this it may be inferred that irrespective of provisioning the true value of NPA is on an upward trend, which
is of serious concern for the profitability of the bank.
The capital adequacy ratio is observed to more or less steady from 2012 to 2018, with values around 13%.
RBI directs the Public Sector Banks in India to maintain CAR of 12%.
Dena Bank
Ratio 2018 2017 2016 2015 2014 2013 2012

Net Profit Margin 5.77 6.06 3.15 3.58 3.88 6.46 7.27
Operating Profit Margin -6.93 -7.27 -4.07 -3.58 -2.74 -0.23 0.66
Return on Assets (ROA) 0.40 0.48 0.26 0.30 0.30 0.52 0.60
Return on Equity (ROE) 7.39 10.25 5.84 7.41 7.37 14.29 15.39
Debt Equity Ratio (Pure Ratio) 16.73 19.68 20.78 22.56 22.88 25.25 23.44
Net Profit per Employee Ratio 4.52 4.79 2.63 3.23 3.24 4.65 4.91
(in Lacs)
Gross NPA Ratio 6.48 2.58 6.77 2.82 2.44 2.30 2.97
Net NPA Ratio 4.32 1.76 4.81 1.91 1.55 1.30 1.72
Capital Adequacy Ratio 13.90 12.73 12.58 11.43 10.97 11.32 13.06
72
Interpretation
It may be observed from the above data that the Net Profit of Vijaya Bank has been improved in 2017,
after continuous down trend from 2014 to 2016. Although, a slight downward trend may be observed from
2012 to 2018.
The Operative Profit Margin, which does not include Other Income is observed to be on continuous
downward trend, unlike Net Profit Margin. From this we may infer that the Income earned from other
sources has played a key role for Vijaya Bank to avoid loss making, without which Vijaya Bank would
post continuous loss.
Return on Assets and Return on Equity are observed to follow similar trend as that of Net profit margin, as
all these parameters consider Net Profit for the calculations. From this we may infer that the parameter of
much concern is the Operative Profit.
The Debt-to-Equity ratio shows a decline from 2012 to 2018 which is due to the increase of equity share
capital over the years.
The Net Profit per Employee proses similar pattern to that of Net Profit Margin, as both involve Net
Profit. The figures dwindled down during 2014 and again raised in 2017 due to the increase of Net Profit
in 2017.
Despite some fluctuations, the Gross NPA and Net NPA both portray similar upward trend from 2012 to
2018. Sudden spike is observed during 2016 and 2018. Sudden increase in provisioning may also be noted
during 2016 and 2018.
73
4.4 Trend Analysis For 10 Years
Calculation of Net Profits of BOB for 10 years
Trend Analysis
Net Profits of Bank of Baroda
Years Net Profits

2008 1,548.00
2009 2,384.00
2010 3,179.00
2011 4,241.68
2012 5,006.96
2013 4,480.72
2014 4,541.08
2015 3,398.44
2016 -5,395.54
2017 1,383.14
2018 -2,431.81
2019 -793.76
2020 -1,264.48
74
6000
4000
2000
0
1 2 3 4 5 6 7 8 9 10 11 12 13
-2000
-4000
-6000
Trend Analysis Net Profits Of Bank Of Baroda Years

Trend Analysis Net Profits Of Bank Of Baroda Net Profits
Interpretation
 In the above graph it represents the trend analysis of BOB bank for 10 years.
 In the above graph X axis represents no of years and Y axis represents net profit values.
 In the above graph dark line represents net profits and dotted line represent liner trend line.
 In 2008 the net profits were 1,548.00 and in 2009 - 2012 it started increasing, slowly it started
decreasing from 2013-2018.
 In the above graph the net profits of 2019 and 2020 were forecasted values.
75
Calculation of Net Profits of Dena Bank for 10 years
Trend Analysis
Net Profits of Dena Bank
Years Net Profits
2008 360
2009 423.66
2010 511.25
2011 612.63
2012 803.14
2013 810.38
2014 551.66
2015 265.48
2016 -935.32
2017 -864.62
2018 -1,923.15
2019 -1,136.14
2020 -1334.81
76
2500
2000
1500
1000
500
0
1 2 3 4 5 6 7 8 9 10 11 12 13
-500
-1000
-1500
-2000
-2500
Trend Analysis Net Profits of Dena Bank Years

Trend Analysis Net Profits of Dena Bank Net Profits
Interpretation
 In the above graph it represents the trend analysis of Dena bank for 10 years.
 In the above graph X axis represents no of years and Y axis represents net profit values.
 In the above graph dark line represents net profits and dotted line represent liner trend line.
 In 2008 the net profits were 360.00 and in 2009 - 2013 it started increasing, slowly it started fluctuating
from 2014-2018.
 In the above graph the net profits of 2019 and 2020 were forecasted values.
77
Chapter 5
Conclusion
The merger of Vijaya Bank and Dena Bank into Bank of Baroda is planned to be effective from April 1st,
2019. The uniting emphasises on consolidating and group action smaller banks with larger banks. The
tripartite amalgamation reflects the government's focus towards consolidation and strengthening of public-
sector banking and also to deal with the raising problematic issues like non-performing assets (NPAs) and
default of loans. And the main reason for merger was the merged entity or the new entity the total business
will be around 1,482,325 lakh cr and as the result of this merger this particular bank or the new entity which
will be created will be the 3rd largest bank in India. The NPA’s in banking sector are going to increase in the
financial year 2019. As per this particular report in the financial year 2018 the NPA’s is 11.6% and in the
financial year 2019 they may increase to 12.2% of total loans issued by the banking sector. And the same
report also mix one more concerning point that is if the situation goes beyond control rather than limiting to
12.2% the NPA’s may actually increase to 13.3%.
It is well known that Bank plays a vital Role in any economy for performance of weak bank decrease the
level of economy, so to strengthen and to compete in global field weak banks require merger in big strong
banks to compete in global field weak banks require merger in big strong banks to reform them. Merger of
banks may be profitable because of to use resources in a better way of technology which will reduce the cost
and increase the income merger of Dena and Vijaya bank in Bank of Baroda may be an opportunity for Bank
of Baroda to connect the customers of Dena and Vijaya bank in vast geographical area when banks use
common software for their Banking operating system so it is beneficial even after merger like Dena, Vijaya
& Bank of Baroda use ‘ficacle’ of merger of banks will increase capital lending, capacity & investments. So
it is concluded that Dena Bank Vijaya Bank should be merged with Bank of Baroda to reform their bad
loans, poor performance and Non-Performing Assets
After this three-way Merger, Bank of Baroda is become third largest bank to serving at every part of nation
and strengthening the Indian Economy. Now it is concluded on the basis of Annual Report whether merged
entity is navigating towards predefined goal. The following conclusions are formed up on the analysis of
Annual Report of Bank of Baroda for premerger and post-merger period. At the end of first year of the post-
merger period, the market size and customer base of the Bank of Baroda are increased from 8.61 Crore to
13.10 Crore i.e., 52.15 %. The numbers of Branches, regional and zonal offices, ATMs are increased. Bank
of Baroda had either close or rationalise branches to increase operational efficiency and reduce duplication
due post-merger. Liabilities and Assets are enhanced by 46.39% due to Merger. Deposits and Borrowings
are increased by 46.22% and 39.04%. Investment and Loans & Advances are increased by 48.03% and
45.91%. Operating Income is increased by 52.45% and Operating Expenses is increased by 60.15%. Then
78
Operating Profit is increased by 46% and Net Profit is increased by Rs. 112.70 crore i.e., 26%. But The
Gross NPA and Net NPA are also increased in post-Merger period. This is a challenging job for Bank of
Baroda to reduce NPA. The signs of Merger are expressing through Financial Analysis. Overall, the mergers
would help in better management of capital. Along with merger the focus should be on adequate reforms in
governance and management of these banks. Finally, the area of service is more widened due to merger.
Bank of Baroda has experienced positive impact due to merger.
79
Reference
[1] https://www.zeebiz.com
[2] http://www.moneycontrol.com/india/financials/vijayabank/balance-sheet/VB03?classic=true
[3] http://www.moneycontrol.com/india/financials/denabank/balance-sheet/DB?classic=true
[4] https://m.moneycontrol.com/stock/bankofbaroda/BOB/financials/balance-sheet
[5] https://en.wikipedia.org/wiki/Bank_of_Baroda
[6] https://en.wikipedia.org/wiki/Dena_Bank
[7] https://en.wikipedia.org/wiki/Vijaya_Bank
[8] https://www.google.com/amp/s/testbook.com/blog/bank-merger/amp/
[9] https://economictimes.indiatimes.com
[10] https://www.insightsonindia.com
80
Bibliography
Kasliwal, S., & Gupta, D. K. (2021). Small Number of Big Banks: An Overview of Recent Mergers in
Indian Banking Sector. Psychology and Education Journal, 58(3), 1113-1123.
Hinal, P. V. D. (2020). Merger And Acquisition Analysis of Bob, Dena and Vijaya Bank. Psychology and
Education Journal, 57(9), 3489-3496.
Adhana, D., & Raghuvanshi, R. R. (2020). Big Bank Theory: A Study of Amalgamation Plan of 10 Public
Sector Banks into 4 Entities. Available at SSRN 3559291.
Botta, A. (2019) Competitive Advantage of Mergers in Banking Sector-Bank of Baroda-Vijaya bank-Dena

bank Theoretical Analysis.
LIN, L. (2013). Merger and acquisition: Definitions, motives, and market responses. Encyclopaedia of
finance, 541.
Ali-Yrkkö, J. (2002). Mergers and acquisitions: Reason and results (No. 792). ETLA Discussion papers
81
Annexure
Questionnaire
Public View & Opinion Regarding Merger of Bank of Baroda & Dena Bank
My name is Sonu shah student of TYBMS (finance). I am conducting a study titled “A study on Merger of
Bank of Baroda & Dena Bank.” The aim of this study is to analyses which Bank is on better Position
HDFC or ICICI and which is more suitable For Investors & Traders. The first part covers respondents’
demographic information. The second part covers information related to Regarding Merger of Bank of
Baroda & Dena Bank You are required to put a tick (✓) against the statement you think it is the most
important to you.
Section A)
Personal Information
Name: __________________________________________
1) Gender
a. male
b. female
2) Age group
a. 18-20
b. 21-30
c. 31-40
d. 41-50
3) Education Level
a. SSC
b. HSC
c. Graduate
d. Post Graduate
82
Section B)
1) Do you Know About Merger/Acquisition
a. yes
b. no
2) According to you what is Merger?
Ans.
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
3). Do you know about Merger of bank of Baroda and Dena bank?
a. yes
b. no
4) Have you open Bank Ac/ in Bank of Baroda
a. yes
b. no
5) Do you have Ac/ with Dena Bank
a. yes
b. no
6) Did you get any Advantage of this merger?
a. yes
b. no
7) If yes then what advantage you get?
Ans.-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
83
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------
8) According to You what will be the effect of this merger?
a. Positive
b, Negative
9) If positive then what will be the positive effect?
Ans.-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
10) If Negative then what will be the positive effect?
Ans.-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
11) After Merger you want to open A/c with Bank of Baroda?
a. yes
b. no
12) Do you think That after merger bank will provide more better service to its customers?
a. yes
b. no
13) Is there any impact on the employee of the both bank?
a. yes
b. no
14) If yes Then what impact will happen on employees of both the banks?
a. yes
84
b. no
15) Are you happy or sad with this merger (as Customer)?
a. Happy
b. Sad
16) Do you have any complaint regarding bank?
a. yes
b. no
17) If yes then what complaint do you have?
Ans.-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
18) Do you have any suggestion for this merger to the bank?
Ans.-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
85

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Chapter 1

The Banking Sector is serving nation and

1.2 Company Profile

Address Suraj Plaza-1, Sayaji Ganj, Mumbai, Maharashtra, 400051

Industry Financial Services

Ticker Symbol & Exchange BANKBARODA (NSE)

Revenue (2023) $11.9B -2% (2023 vs 2022)

Net Income (2023) 407.2% (2023 vs 2022)

Net Profit Margin (2023) 416.8% (2023 vs 2022)

Formerly Known as Devkaran Nanjee Banking Company

A second consortium or joint-venture bank followed in 1985. BoB (20%), Bank of India (20%), Central

In 2006 BoB established an Offshore Banking Unit (OBU) in Singapore.

• It has its headquarters in Mumbai Maharashtra

Procedure of Mergers & Acquisitions

To make a public announcement an acquirer shall follow the following procedure:

1.4 What is merger?

• All of these are done to please shareholders and create value.

1.5 Types of Mergers

3)Market Extension Mergers

5) Product Extension Mergers

1.6 History of Merger

ANCHOR BANK BANKS MERGED

Punjab National Bank United Bank of India and Oriental Bank of

Indian Bank Allahabad Bank

Canara Bank Syndicate Bank

Union Bank of India Andhra Bank and Corporation Bank

State Bank of India State Bank of Bikaner and Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore

Bhartiya Mahila Bank

1.7 Mergers and Acquisitions Benefits

1. Economies of Scale

2. Economies of Scope

4. Access to the Best Talent

5. Access to Resources

6. Diversification of Risk through Portfolio Divergence

7. Cost-Effective Alternatives for Facilities

8. Access to New Markets

10. Enterprise Continuation

11. Expansion and Growth

12. Surplus of Liquidity

13. Tax Saving

14. Corporate Restructuring

1.8 Procedure of Bank Merger

To make a public announcement an acquirer shall follow the following procedure:

1.9 Guidelines for Merger or Amalgamation of Private Sector Banks

Approval by board of directors

Amalgamation between two banking companies

Amalgamation of an NBFC with a banking company

Information and documents to be furnished

1. Draft scheme of amalgamation approved by the shareholders of the banking companies;

2. Certificates authorized by each of the officials present at the meeting of shareholders;

4. Details of the proposed CEO of the banking company after amalgamation;

RBI Guidelines on Mergers & Acquisitions of Banks

1.10 Merger & Acquisition in The Indian Banking Sector

1.11 Reasons for M&As in Banks

The following are the reasons for the mergers in banks:

1.12 Challenges of Merger

1.13 The Reasons for BoB Merger with Dena Bank

8) Recommendations of Narasimhan committee - Three tier structure of the banks