A Review of the Pre-merger Performance of Select Public Sector Banks in India Using Key Performance Indicators

The banking industry in India comprises a huge number of public sector banks which account for a large stake in the market share of the banking sector assets. With a view to improving performance and reaping the advantages of optimal size, the merger of public sector banks was recommended by the Narasimham committee in the early nineties. The proposal to merge six public sector banks was put forth by the Union Government in 2019. The present research paper is an insight into the stability of performance of six state-owned banks, namely Allahabad Bank, United Bank of India Corporation Bank, Oriental Bank of Commerce, Syndicate Bank, Andhra Bank for the period 2008–2019 in terms of their key performance indicators. It also tries to establish the factors which influence the financial capabilities of these state-owned banks which were identified for merger. The results reveal that among the seven public sector banks chosen for merger, Oriental Bank of commerce was most consistent with respect to deposits, advances, interest income, interest expenses, and operating expenses while Syndicate Bank was consistent in profitability. Allahabad Bank was consistent over time in investments and other income while Andhra Bank and United Bank of India exhibited some consistency with respect to non-performing assets and provisions and contingencies. Additionally, the analysis revealed that factors influencing financial capabilities of merging banks could be categorised into profit influencers, risk measures, revenue influencers and efficiency measures. Future studies on the mergers of public sector banks can delve into whether these mergers were instrumental in achieving the synergistic objective and enhanced the overall profitability of public sector banking.