Performance Analysis Of Consolidation On The Efficiency And Profitability Of Public Banks In India

Abstract

Consolidation in the banking sector is a major policy directive used to remedy economic deficiencies while also promoting growth in the sector. In many countries, the consolidation of the banking sector has involved a large number of small banks, creating concerns that the reduction in the number of these institutions could harm the availability of credit to small businesses that have traditionally relied on bank credit. When a bank merges, the larger bank can increase its lending capacity to larger borrowers and restructure its portfolio, concluding credit arrangements with smaller debtors. The economic case for internal consolidation is undisputed. This study examines the manner in which the consolidation affects the performance of India's nationalized public banks. The study uses random sampling to identify the banks for the investigation. Four hypotheses were assessed with the student t-test and a multiple linear regression model. The results demonstrate a significant difference in bank performance following the consolidation process. Furthermore, the findings demonstrated that bank consolidation has a considerable impact on the performance of deposit-taking banks. The primary goal of this research is to investigate the factors of profitability and efficiency, as well as to investigate how consolidation affects the profitability and efficiency of Indian public banks. The Simultaneous Equation Method (SEM) and META Analysis are used to compute the relationship between bank profitability, efficiency, and consolidation. The findings suggest that efforts to provide financial system stability and efficiency should take into account the process of banks consolidation and the increasing globalisation of financial transactions. The ultimate outcome of the study suggests that consolidation has increased the overall efficiency of combined institutions.