Understanding the aftermath of banks merger: analyzing price effects on public sector banks since the COVID-19 pandemic

What is it about?

This study delves into the impact of recent bank mergers among major Public Sector Banks (PSBs) in India, focusing on six merged entities' financial performance. Against the backdrop of the global Covid-19 pandemic, the research aims to gauge how efficiently these PSBs managed through this crisis. The methodology involves analyzing panel data from 2020 to 2023 using advanced statistical techniques like the one-step system Generalised Method of Moments to measure efficiency. The findings suggest that PSB mergers have indeed strengthened financial metrics and efficiency, evidenced by improved return on equity (ROA), net profit margin (NPM), and better asset management. Merged entities also benefit from economies of scale, cost efficiencies, risk diversification, and technological investments. This study contributes novelty by analyzing the profitability and efficiency of Indian banks post-mergers amid the Covid-19 pandemic, particularly significant given the structural changes in PSBs preceding the pandemic. The practical implications of the study emphasize the importance of continued consolidation efforts to enhance the resilience of the banking sector, advocating for improved efficiency, governance, and asset quality management. These steps are deemed essential for successful bank mergers and for nurturing a robust and competitive banking landscape in India.

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