write a short note on merging of banks in recent times. (100 words)
Experts, pls answer. merger of banks.
Solution:
When two or more entities combine together to either create a new entity or an existing entity by absorbing the other entity. Any two public sector banks or public and private sector bank can merger with the help of government and central bank. Before merger they need to take approval from parliament also. Parliament can reject and modify the merger. In India very first merger of banks took place in year 1998. Recently merger that took place by combining 10 banks into 4.
Reason for mergers of bank:
1. To protect vulnerable public sector banks from losses and also it works as safeguard to its customer.
2. Larger banks have more funds to distribute to its lenders.
3. Larger the bank more it can compete in international market it also helps in reducing cost.
Through merger of banks we can expect that weak banks sell their assets, cut cost and also close loss making branches.
When two or more entities combine together to either create a new entity or an existing entity by absorbing the other entity. Any two public sector banks or public and private sector bank can merger with the help of government and central bank. Before merger they need to take approval from parliament also. Parliament can reject and modify the merger. In India very first merger of banks took place in year 1998. Recently merger that took place by combining 10 banks into 4.
Reason for mergers of bank:
1. To protect vulnerable public sector banks from losses and also it works as safeguard to its customer.
2. Larger banks have more funds to distribute to its lenders.
3. Larger the bank more it can compete in international market it also helps in reducing cost.
Through merger of banks we can expect that weak banks sell their assets, cut cost and also close loss making branches.