The merger of banks in India: Boon or bane for the Indian economy?

Abstract

Abstract A merger of banks is not a new phenomenon but lately, it has received significant attention in the banking sector. A successful merger of various banks in India, and elsewhere, has attracted the attention of the scholars in the field. The rationale behind such mergers has been hotly debated, and the moot point question remains whether bank merging is good for the economy as a whole. Against this backdrop, this paper attempts to analyze the 'for' & 'against' views on the issue and concludes that the mergers of banks in India positively affects the health of the banking sector & ultimately is helpful to the Indian economy. We argue that the merger of banks brought synergy in the operations of the banking sector primarily in terms of customer reach. In addition, it also provides economies of scale, even though the management change remains a challenge. Similarly, amalgamations also bring relief for the Reserve Bank of India (RBI). RBI can better concentrate its efforts on the supervision of niche banks and assist the government in greater economic and policy issues.