Strategic Drivers and Financial Outcomes of Public Sector Bank Mergers in India: A Post-2020 Empirical Analysis

Abstract

One of the most notable and important structural reforms in the Indian banking sector over the past few years has been the consolidation of public sector banks (PSBs). In April 2020, the Government of India carried out the biggest consolidation of PSBs by merging 10 public sector banks into four larger banks. The main purpose of these mergers was to establish more powerful and competitive banks, which would have better financial strength, enhanced operational efficiency, higher technical capabilities, and risk management capabilities. The present study is concerned with strategic drivers and financial impacts of mergers of Indian public sector banks beyond 2020. Specific focus on capital adequacy, non-performing assets (NPAs), economies of scale, operational efficiency, digital transformation, financial inclusion, risk diversification, and global competitiveness. The study design is empirical (Secondary Data), which is appropriate for this study, as data are available from Bank Annual Reports, Reports of the Reserve Bank of India, Government of India documents, and relevant literature. The financial performance is measured using indicators such as return on assets (ROA), return on equity (ROE), net interest margin (NIM), capital adequacy ratio (CAR), gross and net NPA ratio, cost-to-income ratio, credit growth, deposit growth, employee productivity, etc. Prior research has revealed the mixed effects of mergers on performance in various areas. While consolidation has led to larger banking institutions and improved asset quality, it has also helped to enhance the capital strength and capacity of the institutions, and the ability to achieve the synergies arising from the mergers and acquisitions will require a major focus on post-merger integration, technology harmonisation, human resource management, and effective governance. The study finds that PSB mergers should be understood as a long-term strategic restructuring process and not a short-term measure to boost profit. It suggests more robust post-merger monitoring, technology integration, risk-management enhancement, customer-focused strategies, and evidence-based future consolidation policies.