THE IMPACT OF MEGA BANK

MERGER

PRESENTED BY
SNEHA DODRAY
(MBAAB1903)
SANDHYA KHALKHO
(MBAAB1907)
NAZIRUL ANSARI
(MBAAB1911)
BANK MERGERS ARE
FOR PRIVATIZATION
– THE HINDU
(THIRUVANANTHPURAM 19 MARCH
2019 9:20 IST)
 INTRODUCTION

Union finance minister Nirmala

Sitharaman announces the merger of
ten big public sector banks into four.
1. PNB+ OBC+ United Bank
2. Syndicate bank + Canara bank
3. UBI +Andhra+ Corporation
bank
4. Indian bank +Allahabad bank
 PNB + OBC+ UNITED BANK

• 2nd largest PSB with

business of Rs
17.95 lakh crore.
(larger than PNB
1.5 times)
• 2nd largest branch
network in India
with 11,437
branches.
 OBJECTIVES OF MERGER

1. Mergers seek to improve income from

services.
2. The increase is offset by higher staff
costs.
3. Return on equity improves because of
decrease in capital.
4. Acquisition aims to restructure the loan
portfolio of the acquired bank.
5. Improve lending policies result in
higher profits.
 ADVANTAGES OF MERGER

1. Merger helps to reduce the cost of

operation.
2. It helps to improve the professional
standard.
3. Provides better efficiency ratio which is
beneficial for the economy.
4. Multiple posts get abolished, resulting in
substantial financial savings.
5. Banking mergers improve risk
management.
6. Merger helps the geographically
concentrated regionally present banks to
expand their coverage.
DISADVANTAGES OF MERGER

1. Acquiring banks have to handle the burden of

weaker banks.
2. It is difficult to manage the people and culture of
different banks.
3. Merger destroys the idea of decentralization.
4. Larger banks are more vulnerable to global
economic crises.
5. Coping with staffer’s disappointment could be
another challenge for the governing board of the
new bank which could lead to employment issues.
 IMPACT OF MERGER ON SOCIETY

• Effect on the employment levels.

• Increasing level of unemployment
hence affecting the society negativity
in general.
• Lesser innovations and services, as
less competition in market will reduce
the options.
• Mergers are associated with time
wastage.
CONCLUSION

1. Bank consolidation is a tricky issue.

2. While it is said that long term
benefits of consolidation outweighs
the short term concern it must not
be a general policy.
3. It is only to be done with right
banks for right purpose with profit
safe guards.
 STUDY
CASE
NIRAV MODI SCAM
 WHAT IS PNB SCAM ?

• PNB scam has been the biggest fraud in

India's banking history.
• The Punjab national bank scam relate to
fraudulent letter of undertaking worth Rs
10,400 crore issued by the bank.
• The key accused in the case were jeweller
and designer Nirav modi, his maternal
uncle Mehul Choksi and some PNB
employees.
• They escaped India in early 2018, days
before the news of the scan became public.
 HOW SCAM HAPPENED ?

• Bankers used fake letters of undertakings at PNB’s brady house branch in fort, Mumbai
• The lous were opened in favour of branches of Indian bank for import of pearls for a period of
one year.
• The guidelines were ignored by overseas branches of Indian banks, they failed to share any
documents/ information with PNB which were made available to them by the firms at the time of
availing credit from them.
• Nirav modi got his 1st fraudulent guarantee from pnb on march 10, 2011 and managed to get 1,212 more
such guarantees over the next 74 months.
• The probe agency found that Nehal Modi brother of Nirav Modi had destroyed the devices soon after the
scam broke out.
• The enforcement agency has so far seized movable and immovable properties to the tune of Rs 2362 crore
in the PNB fraud case.
 HOW DID THE SCAM UNFOLD

• On 29th January 2018, PNB lodged a FIR

with CBI stating that fraudulent LoUs
worth Rs 2.8 billion (Rs 280.7 crore) were
first issued on 16th January.
• In the complaint, PNB has named three
diamond firms, diamond RUs, solar
exports and stellar diamonds.
• As of 18 may 2018, the scam has
ballooned to over Rs 14,000 crore.
EFFECT OF SCAM ON PNB & SOCIETY

• Stock prices of PNB fell from Rs

160 to Rs 95.5 on 9th march 2018.
• RBI ordered PNB to pay all the
debts to other banks.
• The RBI had stopped banks to issue
LOU.
• Because of the fraud PNB has lost
trust of people.