Merging to Become Bigger and Stronger: A Case Study of Vijaya Bank and Dena Bank Merger with Bank of Baroda

Abstract

In the rapidly changing business environment  firms have to be efficient enough not only to survive  but to grow further with a pace fast enough to maintain the edge over the others. To cater the ever growing needs of corporates, banks have to be strong and efficient. Merger wave has engulfed the banking sector as well all over the world and India is no exception to it. In the post-economic reforms era Indian banks witnessed a series of banks mergers and public sector banks were not far behind. The main objective of this paper is to analyse the impact of consolidation on banks performance and efficiency. The present study deals with the analysis of merger of Vijaya Bank and Dena Bank with Bank of Baroda which took place in 2019.  The case study approach has been used to compare the financial performance in pre-post period based on CAMEL Model in which three years pre-post window period has been  used. The data  was analysed using Paired Sample t-test and Wilcoxon Signed Rank Test. The analysis report was generated using SPSS software.  The outcomes of Pared Sample T-test found all the parameters namely, Capital Adequacy Ratio, Net NPA to Total Advances, Return on Assets, Operating Profit to Total Asset and Total Investment to Total Deposits improved in three-year window but the improvement was significant in case of NPA only. In the report generated from Wilcoxon Signed Rank Test, all the parameters improved but the improvement was not significant in any of the parameters.  Therefore, the study comes to the conclusion that mergers although helped in improving the performance yet, the fair outcomes could be seen in the long run only. Besides the performance of public sector banks could be considered in terms of social impact and not just in terms of immediate monetary benefits.