Mergers And Amalgamation Of Banks In India
- IJLLR Journal
- 1 day ago
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Mergers And Amalgamation Of Banks In India: A Study Of Public Sector Bank Consolidation And Private Sector/NBFC Amalgamations Under The Banking Companies (Acquisition And Transfer Of Undertakings) Acts, 1970 & 1980, And The Banking Regulation Act, 1949
Aanchal Bary, NMIMS KPMSoL
ABSTRACT
The Indian banking sector has, over the past five decades, undergone repeated waves of consolidation driven alternately by the socialist imperative of nationalisation, the efficiency logic of scale economics, and the necessity of crisis resolution. With special reference to Section 9(1)(c) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the parallel 1980 Act, as well as Sections 44A and 45 of the Banking Regulation Act, 1949, this paper analyzes the legal framework governing mergers and amalgamations of Public Sector Banks ("PSBs"), private sector banks, and Non-Banking Financial Companies ("NBFCs") in India. Using a doctrinal, case-study-based methodology, the paper analyses the 2019-2020 amalgamation of ten PSBs into four "anchor" banks, and contrasts this government-driven consolidation with the regulator-driven, crisis-triggered amalgamations of Yes Bank Ltd. and The Lakshmi Vilas Bank Ltd. ("LVB") with DBS Bank India Ltd. The study finds that while the statutory toolkit available to the Central Government and the Reserve Bank of India ("RBI") is doctrinally coherent, the exercise of these powers has evolved from a purely administrative, Parliament-mediated scheme-making power under the 1970/1980 Acts towards an increasingly reserve-bank-led, moratorium- triggered resolution power under Section 45 of the Banking Regulation Act, 1949, that operates with far greater speed but weaker ex ante shareholder and creditor participation. The paper offers suggestions for strengthening early- warning supervision, codifying a resolution framework akin to a bespoke bank insolvency law, and improving accountability and disclosure in scheme formulation.
Keywords: Bank Mergers, Public Sector Banks, Banking Regulation Act 1949, Section 45, Yes Bank, Lakshmi Vilas Bank, DBS Bank India, Amalgamation, Banking Companies (Acquisition and Transfer of Undertakings) Act.
