Impact of Merger of One Nationalised Bank with Another Nationalised Bank – Lessons from Merger in Indian Banking Industry

Abstract

For some organizations, change is beneficial, but others may take it as a threat. But if the implementation of change is slow, with gradual process, made after careful thought, is evolutionary rather than revolutionary, it is effective. The whole issue revolves round policies of restructuring the banking industry in India with various crucial issues of staff replacement, profitability, intensifying competition technology and size of Indian banking industry. The problem revolves around the issue how and why the further mergers of nationalized bank with nationalized banks were restricted. Narsimham Committee's recommendations were for a better cause of reforms in banking industry of India. In wake of the implementation of the recommendations of the Narsimham committee, NBI was merged with PNB by the government on 04/09/1993. But a hasty and imposed merger without studying the strength and weaknesses of the project led to unrest in the target bank i.e. PNB which delayed the development of the bank for almost 4 to five years. A long legal battle continued during the period and an atmosphere of mistrust prevailed among the employees. The synergies of the merger could not be utilized during the period and the result was that the government had to halt the impending mergers of other nationalized banks.

Keywords: change, nationalised banks in India , Public sector banks, Narsimham committee, merger, NBI, PNB