FINAL REPORT SIP

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SYMBIOSIS INSTITUTE OF BUSNIESS MANAGEMENT, HYDERABAD
A REPORT ON
Synergies Related To Consolidation of 27 Public Sector
Banks into Six
Submitted by:
AAKASH SINGH
15021141004
MBA (Finance)

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Table of Contents
Table of Contents
I Authorization --------------------------------------------------------------------------------------------------------------------5
II Acknowledgements ------------------------------------------------------------------------------------------------------------6
III Executive Summary---------------------------------------------------------------------------------------------------------- 7
1. INTRODUCTION
1.1 Background-------------------------------------------------------------------------------------------------------------- 8
1.2 Objective of the project -----------------------------------------------------------------------------------------------8
1.3 Methodology ------------------------------------------------------------------------------------------------------------9
1.4 Limitations of the study -----------------------------------------------------------------------------------------------9
2. Economy Industry Analysis
2.1 Introduction To World Banking Structure ----------------------------------------------------------------------10
2.2 Data Facts & Figures ------------------------------------------------------------------------------------------------12
2.3 Banking Structure Of Developed Countries --------------------------------------------------------------------14
2.4 Bank of England Banking Structure
2.4.1 History -------------------------------------------------------------------------------------------------------------15
2.4.2 Working Of Bank of England ---------------------------------------------------------------------------------16
2.4.3 Top 5 Banks in England -----------------------------------------------------------------------------------------18
2.5 China Banking Structure
2.5.1 History --------------------------------------------------------------------------------------------------------------19
2.5.2 Financial Structure Of China -----------------------------------------------------------------------------------20
2.5.3 Top 5 Banks in China ---------------------------------------------------------------------------------------------23
2.6 USA Banking Structure
2.6.1 History ---------------------------------------------------------------------------------------------------------------23
2.6.2 Structure of FRS ---------------------------------------------------------------------------------------------------24

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2.6.3 Working of Federal Reserve System ------------------------------------------------------------------------ 25
2.6.4 Analysis of Federal Reserve System Balance Sheet -------------------------------------------------------26
2.6.5 Top Banks in USA ----------------------------------------------------------------------------------------------29
3. Company Analysis
3.1 About Central Gov. Plans to Merge27 PSB into SIX ------------------------------------------------------------- 30
3.2 BASEL III ------------------------------------------------------------------------------------------------------------------- 32
3.3 Reasons for Merging PSB Banks
3.3.1 Indian Banks on International Stage ----------------------------------------------------------------------34
3.3.2 Increasing NPA ----------------------------------------------------------------------------------------------------38
3.4 Comparisons of NPA of Public & Private Sector ------------------------------------------------------------------- 41
3.5 Data Facts & Figures ------------------------------------------------------------------------------------------------------ 43
3.6 NPA Splits in Different Sectors ---------------------------------------------------------------------------------------- 48
3.7 Classification of Loan Assets of Bank ----------------------------------------------------------------------------- 50
4. Project Specific Analysis
4.1 Consolidation of Banks & Methodology Used for Clubbing -----------------------------------------------------54
4.2 Combination 1 --------------------------------------------------------------------------------------------------------------58
4.2.1 Reason For the Merger ---------------------------------------------------------------------------------------58
4.2.2 Synergies Related to this Merger ------------------------------------------------------------------------- 59
4.3 Combination 2------------------------------------------------------------------------------------------------------------- 60
4.3.1 Reason For the Merger -----------------------------------------------------------------------------------------60
4.3.2 Synergies Related to this Merger ----------------------------------------------------------------------------61
4.4 Combination 3 ----------------------------------------------------------------------------------------------------------62
4.4.2 Synergies Related to this Merger --------------------------------------------------------------------------- 63
4.5 Combination 4 ----------------------------------------------------------------------------------------------------------64
4.5.1 Reason For the Merger---------------------------------------------------------------------------------------- 64

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4.6 Combination 5 --------------------------------------------------------------------------------------------------------- 66
4.6.1 Reason For the Merger---------------------------------------------------------------------------------------- 66
4.6.2 Synergies Related to this Merger-- ------------------------------------------------------------------------- 67
4.7 Combination 6 ----------------------------------------------------------------------------------------------------------68
4.8 Combination and effect on Financials
4.8.1 Combination with strong influence in India ------------------------------------------------------------- 70
4.8.2 Consolidated Financial Data ----------------------------------------------------------------------------------72
4.8.3Data Facts & Figures --------------------------------------------------------------------------------------------73
5. Conclusion & Recommendation ------------------------------------------------------------------------------------- 75
6. Learning from SIP -------------------------------------------------------------------------------------------------------- 78
7 References ----------------------------------------------------------------------------------------------------------------- 79

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Authorization
This is to certify that Mr. Aakash Singh (PRN No.15021141004) student of Symbiosis Institute
of Business Management; Hyderabad has successfully completed the summer internship program
(SIP) at LKP Securities Ltd. as a partial fulfillment of the MBA program from 18th
April 2016 to
11th
June 2016.
I certify that this project title “Synergies Related to consolidation of 27 Public sector banks
into Six” is an original work and has not been copied from any source.
The given report is self made by the student during his internship program under the guidance of
Mr. Srikanth Chelimilla, Branch Manager at LKP SECURITIES LTD, Hyderabad.
.
Mr. Srikanth Chelimilla
Branch Manager
LKP SECURITIES LTD

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Acknowledgement
I Aakash Singh wish to show my gratitude to all the people who are very generous in sharing
their expertise knowledge and precious time with me in completion of the project.
I express my sincere gratitude to my Company guide Mr. Srikanth Chelimilla (Branch
Manager), under whose mentoring I undertook my project and also for his support and
encouragement in completing the project within limited period of time. I am very thankful to him
for giving me his precious time in spite of his busy and hectic schedule.
I would also like to give special thanks to my faculty guide Prof.Hariprasad Soni, Symbiosis
Institute of Business Management, Hyderabad for his valuable contribution, helpful comments
and suggestions. He deserves very special words of appreciations for his invaluable support,
encouragement and point taking efforts, without which achieving the goal would have been a
much difficult task.
And finally I would like to thank my Family who have supported me directly and indirectly
during my project completion.
(Aakash Singh)
SIBM – Hyd

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Executive Summary
During my Internship at LKP SECURITIES Hyderabad, a detailed study of all the verticals of
banking sector likes Non-Performing Assets Of Public & Private Sector bank, a detailed study of
working of banking sector in USA, UK & CHINA, combinations of banks based on various
aspects has been done.
Worked on Consolidation of Public sector banks from 27 to SIX & why government are coming
with this reform what are the reasons for this and also study the banking sector and the future
growth of this sector after consolidation and what are the synergy related to this. In short deeply
study of whole banking sector in India and also study the how banking sector works in USA,
CHINA & UK.
In making combinations of banks various factors have been considered.
1. NPA
2. GROSS NPA
3. Geographical Region
4. Detailed Study of balance sheet.
In Interbank Analysis Financials of year up to 2015 are used for the comparison or combinations.

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1. INTRODUCTION
1.1 Background
Currently, in India the banking structure is mix of bank type in which they serve various sectors
or segments in the economy. However, the whole banking system is dominated by Public sector
banks in India and PSB has almost 70 % market share in the banking system in terms of total
assets. At present there are 27 PSB with various sizes and SBI is the top most bank is the system
and roughly it is 25 times the size of smallest bank not comparing with BMB (Bharatiya Mahila
Bank). Most of the PSB have almost same business models and they all are competing with each
other in the market. There is a argument going on which says there are lots of PSB in India with
similar characteristics and consolidation among these banks with result in positive synergy.
The consolidation among PSB is an old history and the Narasimham Committee Report in 1991
also recommend to have a 3-tier capital structure in India which says to establish a three largest
banks which having an international presence and 8 – 10 national bank and other regional and
local banks. Currently India is in top 7 countries as compared to GDP but the Indian banks are
not in TOP 70 banks worldwide. So the finance minister has come with a roadmap for
consolidation of banks and wants to merge 27 PSB into 6.
1.2 Objective
1. To understand the reason for getting merger of these PSB.
2. Deep study of the current market scenario of Indian banking Industry.
3. Get a knowledge how banking structure of Developed economy work.
4. Making a combination of banks for merger on the basis of keeping various aspects in mind.
5. Synergy related to these mergers.

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1.3 Methodology:
Primary Data:
Views of the concerned officials were gathered by directly interacting with them, and such data
was found very useful while analyzing and drawing conclusions.
Secondary Data:
1. The research has been based on secondary data analysis. The study has been exploratory as it
aims at examining the secondary data for analyzing the previous researches that have been done
in the area of banking sector. In the exploratory study, the various technical and fundamental
indicators that are important for analyzing bank were used to analyze banks.
2. In this project Descriptive research methodologies were use.
3. In the project theoretical study, Historical study, Comparative study is undertaken.
4. Recent RBI norms, IBA Bulletin etc is taken into consideration.
1.4 Limitations
1. There is no recent news regarding merger so it’s difficult to find the data required in the
project.
2. The study is based on secondary data,
3. Data has been drawn from journals, so some information may not be complete.
4. Latest Financial year data has not come so it creates problem to know the progress in banking
system in last financial year.

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2. Economy Industry Analysis
2.1 Introduction to World Banking Structure
The banking structure is one of the most important component in the economy of the world to
get it grow faster. In any of the country the banking is one of the key aspect by which a country
can develop. The bank and the economy of the country are interrelated with each other. There
are number of financial institutions which include Insurance Companies, investment banks,
finance companies but bank is one of the most important financial institution which helps in
creation and flow of money in the economy. The bank is an institution which helps depositors to
deposit their money and with the deposit money they supply the capital in the economy and bank
is the most important sector which is regulated worldwide. In the economy to get it encourage
and make stability in the financial organization there is an International banking structure and
the financial organization which helps the economy to get it stable.
In generally it is used to say that World Bank has been originated in Italy. In the middle of the
12th Century, there is a big financial crisis and at that time Italy is lacking behind because of the
effects on the World War in their country. They desperately needs money in order to cover their
war expenses and make country stable so at that time government comes with a plan and forced
their citizen to take loan from world bank at rate of 5% per annum in order to meet their war
expenses. Such loans are known as ‘compare’, ‘Monte’ etc.
The World Bank usually created to meet the needs of the war-torn countries but now the
meaning of World Bank has changed. The mission of World Bank has now globally wider in the
world and the most important mission of the World Bank is to provide Long-Term Financing for
the development of the economy.
WWoorrlldd BBaannkk
International Bank for
Reconstruction and
Development (IBRD)
International Development
Association or IDA.
World Bank is comprises of two main bodies which are International Bank for
Reconstruction and Development (IBRD) & International Development Association, IDA.

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International Bank for Reconstruction & Development (IBRD)
IBRD is also known an International Bank for Reconstruction & Development. The name itself
can give you the idea of the functioning of the bank. The main function of this institution is to
provide the funds or finance to developing countries in order of the development of the country.
The institution provide Loans at lower interest rates and moreover at no interest rates. They also
provide technical and research assistance to the developing countries and also provide loans for
developing the economy of the country. They provide infrastructure loans. They provide loans
on various projects which can help in development of the country such as Power plant, Roads,
Rail projects, ports, telecommunication, water system, health, education and debt relief and all
these projects help in the development of any country.
IBRD comprises of 188 members nationwide and each country pays some subscription amount.
Each country has 250 votes and the largest shareholder is USA in IBRD but the decisions are
made by the majority votes and the largest shareholder has benefit and can control the result
because they have most of the votes.
On the other hand International Development Association IDA has started their functioning in
1960. IDA works with IBRD and focuses its efforts on the poorest countries in the world and
they also offer assistance to the poorest countries when their economy is struggling.
Motto Working for a World Free of Poverty
Formation July 1944; 71 years ago
Type Monetary International Financial
Organization
Legal status Treaty (Legal Status)
Purpose Main purpose is Crediting
Headquarters USA Washington, D.C
Region Worldwide
Membership IBRD 188 country
IDA 173 country
Key people President - Jim Yong Kim
Parent organization World Bank Group

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2.2 Data Facts & Figures
GDP Sector Composition
Source: The World Factbook (sector composition)
GDP means monetary value of all goods and services which produced in a country in a specific
period of time.
Analysis: The GDP of India is around 2048 billion US Dollar in 2014 and GDP value of India
represents 3.33% of world economy. Acc. to this report, you can see the contribution of each
sector in a GDP. Service sector includes hotel, transport, government services such as health,
education. It also includes Bank services and many more services included in GDP.
In this report you can see the contribution of service sector in an economy of each country and
service sector is one of the most important sectors and it contributes around more than 60% in
their GDP. The USA is on the top with high GDP Contribution and their service sector has
approx 80% contribution in GDP and India holds 10th
position in world in GDP and their service
sector holds around 60% contribution in GDP.
Rank Country
GDP
(millions of
$)
Agriculture Industry Services Year
GDP Share GDP Share GDP Share GDP Sector
1 USA 17,420,000 278,720 1.6 3,605,940 20.7 13,535,340 77.7 2014 2014
2 China 10,360,000 1,004,920 9.7 4,548,040 43.9 4,807,040 46.4 2014 2014
3 Japan 4,770,000 57,240 1.2 1,225,890 25.7 3,486,870 73.1 2014 2014
4 Germany 3,820,000 34,380 0.9 1,176,560 30.8 2,612,880 68.4 2014 2014
5 France 2,902,000 49,334 1.7 562,988 19.4 2,289,678 78.9 2014 2014
6
United
Kingdom 2,848,000 17,088 0.6 586,688 20.6 2,244,224 78.8 2014 2014
7 Brazil 2,244,000 130,152 5.8 534,072 23.8 1,579,776 70.4 2014 2014
8 Italy 2,129,000 46,838 2.2 508,831 23.9 1,573,331 73.9 2014 2014
9 Russia 2,057,000 82,280 4 746,691 36.3 1,228,029 59.7 2014 2014
10 India 2,048,000 366,592 17.9 495,616 24.2 1,185,792 57.9 2014 2014
11 Canada 1,794,000 30,498 1.7 505,908 28.2 1,257,594 70.1 2014 2014
12 Australia 1,483,000 54,871 3.7 428,587 28.9 999,542 67.4 2014 2014
13
South
Korea 1,449,000 34,776 2.4 560,763 38.7 853,461 58.9 2014 2014
14 Spain 1,400,000 44,800 3.2 355,600 25.4 999,600 71.4 2014 2014

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GDP Growth (annual %)
Country Name Indicator Name 2010 2011 2012 2013 2014
China GDP growth (annual %) 10.63 9.48 7.75 7.68 7.27
United Kingdom GDP growth (annual %) 1.54 1.97 1.18 2.16 2.94
India GDP growth (annual %) 10.26 6.64 5.08 6.90 7.29
United States GDP growth (annual %) 2.53 1.60 2.32 2.22 2.39
Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/GB-US-CIN?display=graph
In above data the growth of India is impressive and it is growing since 2012 as compared to
other countries growth rate which are stable or not growing.
RANKING OF TOP BANKS AS PER
TOTAL ASSETS
Rank Bank Country Total assets,
US$b
Balance
sheet
1 Industrial & Commercial Bank of China China 3,426.80 12.31.2015
2 China Construction Bank Corp China 2,831.19 12.31.2015
3 Agricultural Bank of China China 2,745.08 12.31.2015
4 Bank of China China 2,594.52 12.31.2015
5 Mitsubishi UFJ Financial Group Japan 2,455.60 12.31.2015
6 HSBC Holdings UK 2,409.66 12.31.2015
7 JPMorgan Chase & Co US 2,351.70 12.31.2015
8 BNP Paribas France 2,180.45 12.31.2015
9 Bank of America US 2,144.32 12.31.2015
10 China Development Bank China 1,897.80 12.31.2015
11 Credit Agricole Group France 1,857.57 12.31.2015
12 Wells Fargo US 1,787.63 12.31.2015
13 Deutsche Bank Germany 1,781.29 12.31.2015
14 Citigroup Inc US 1,731.21 12.31.2015
15 Japan Post Bank Japan 1,728.10 12.31.2015
16 Barclays PLC UK 1,659.77 12.31.2015
17 Mizuho Financial Group Japan 1,623.39 12.31.2015
18 Sumitomo Mitsui Financial Group Japan 1,556.33 12.31.2015
19 Banco Santander Spain 1,465.44 12.31.2015
20 Societe Generale France 1.459.02 12.31.2015
21 Groupe BPCE France 1,275.49 12.31.2015
22 Royal Bank of Scotland Group UK 1,208.37 12.31.2015
23 Lloyds Banking Group UK 1,195.45 12.31.2015
24 Bank of Communications China 1,104.02 09.30.2015

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25 Postal Savings Bank of China China 1,049.19 12.31.2015
26 UBS Group AG Switzerland 954.270 12.31.2015
27 UniCredit S.p.A. Italy 940.796 12.31.2015
28 ING Groep NV Netherlands 920.389 01.31.2016
29 Royal Bank of Canada Canada 865.306 12.31.2015
30 Goldman Sachs Group US 861.395 12.31.2015
31 Norinchukin Bank Japan 855.353 01.31.2016
32 TorontoDominion Bank Canada 846.009 12.31.2015
33 China Merchants Bank China 844.748 12.31.2015
34 Credit Suisse Group Switzerland 830.774 12.31.2015
35 BBVA Spain 820.134 09.30.2015
36 Industrial Bank Co. Ltd China 816.114 12.31.2015
37 Credit Mutuel France 808.906 12.31.2015
38 China CITIC Bank Corp China 790.331 12.31.2015
39 Morgan Stanley US 787.465 12.31.2015
40 Shanghai Pudong Development Bank China 778.305 12.31.2015
41 Intesa Sanpaolo Italy 739.679 12.31.2015
42 Rabobank Group Netherlands 732.985 12.31.2015
43 Nordea Bank Sweden 707.284 12.31.2015
44 China Minsheng Banking Corp China 697.508 09.30.2015
45 National Australia Bank Australia 695.747 01.31.2016
46 Bank of Nova Scotia Canada 662.928 12.31.2015
47 Commonwealth Bank of Australia Australia 657.882 12.31.2015
SOURCE : http://www.relbanks.com/worlds-top-banks/assets
2.3 Banking Structure of Some Developed Countries
Till now , the banking structure of the world with some facts and figures have been shown to
you, now we are going to see the working of the banking structure of some developed countries.
The countries which have been taken into consideration are.
1. United Kingdom
2. China
3. United States of America
While studying the banking structure of these countries you will able to know how the banking
structure work in other developed countries apart from India and the main purpose of explaining
these banking structure are to make you aware about the banking around the world in other
developed countries.

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A bank is institutions which accepts deposit from the general public and provide loans to other
individuals, households, government, corporate and in return earn interest in order to make
profit. In every country the main function of public bank is same. Each country has central bank
which makes policies to make financial and price stability in a country by structuring various
types of interest and make changes in their policies as per economy demands. A bank plays a
vital role in growth of an economy in every country and it creates financial stability in a country
for smooth functioning of economy in various ways.
2.4 Bank Of England Banking Structure
2.4.1 History
Bank Of England was founded in 27 July 1694, and Bank Of England is the central bank of the
united kingdom and the model on which most of the central banks has been placed. The bank
was in private stakeholders but since 1946 it is nationalized.
On 1998 , the bank became the independent public organization and wholly controlled by
treasury solicitor on behalf of the government which give them right or freedom to set monetary
policy. The mission of Bank of England is to promote the best for the people of England by
maintaining monetary and financial stability and the most recognizable responsibility of bank is
to maintain confidence on the bank notes. It sets interest rates, manages the government stock
register. The central bank or Bank of England issue or prints notes in their country in Pounds (£)
which is made under proper security by having best quality and also ensure steps against
counterfeiting (fraud).

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Website www.bankofengland.co.uk Founded 1694
Headquarter Headquarters Type Government
Size Size Revenue 50 to 100 billion (INR) per year
Source: https://www.glassdoor.co.in/Overview/Working-at-Bank-of-England
2.4.2 Working of Bank of England
Bank Of England Working
Bank Of England
Bank of England operates in 2 key areas:
1. Set interest rates to keep inflation in line with the government targets to maintain price
stability.
2. Monitor and take appropriate action in order to maintain financial stability and reduce risk.
These responsibilities are shared with the 3 important bodies which are MPC (Monetary Policy
Committee), PRA (Prudential Regulation Authority) and FPC (Financial policy committee). All
are chaired by the Governor of the Bank of England.

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Monetary Policy Committee (MPC)
The MPC is made up of 9 members comprises of 5 within the bank and 4 external members
appointed by the Chancellor of the Exchequer. The role of the external member is to give
committee access to thinking and expertise beyond the bank itself.
The MPC meets to monitor development in the new economy and set interest rates and adjust
the amount of money in the economy to meet government inflation target of 2%.The minutes of
meeting of this committee published so anyone can see how each individual voted.
Once in 3 months committee publish their inflation report which shows in more details that how
Bank of England judges the outlook for the economy and inflation.
Prudential Regulation Authority (PRA)
The PRA is a part of the bank. It regulates individual financial institution to improve their safety
and soundness.
It is responsible for the regulation and supervision of 1700 banks.
Financial policy committee (FPC)
The FPC Job is to access the risk facing by financial system and the action needed or finding out
the ways to tackle them. It meets formally 4 times a year and publishes its record of meeting and
twice yearly their financial stability report.
The FPC has 10 members which comprises of 5 members from the bank itself, 4 external
members appointed by the chancellor and 1 chief executive of Financial Conduct Authority
(FCA).FCA is an independent regulatory body responsible for protecting consumers and
promotion confidence in financial product and services. It is not a part of the bank. The FPC can
consider a range of action to help strengthen the financial system. In some areas it gives
directions to MPC & PRA. In others, it can make recommendations to them or to other bodies. If
lending is increasing fast, the FPC might for example want banks to raise more capital as an
extra buffer in case things turn sour. In this may FPC give recommendation.

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2.4.3 Biggest Banks in United Kingdom
Source: http://www.advisoryhq.com/articles/top-5-uk-banks-ranking-biggest-british-banks-best-banks-in-the-uk/
Banks Total Assets (Billions)
HSBC Holdings $2,634.14
Barclays PLC $2,114.13
Royal Bank of Scotland Group $1,635.93
Lloyds Banking Group $1,333.99
Standard Chartered PLC $725.91

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2.5 CHINA BANKING SYSTEM
2.5.1 History
The central bank of china is known as People’s Bank of China (PBC). The main functions of
this bank are to regulate and supervise the financial institution and maintain financial and
monetary stability in a country. This bank is the second largest bank in terms of financial assets
after Federal Reserve System of USA.
The PBS established in Dec 1, 1948 by the unification of 3 banks named as XIBEI Farmer bank,
BEIHAI Bank and HUABEI Bank. The headquarter of PBS is in Shanghai and Beijing.
The PBC has a regulatory power to make monetary policy for their country and also regulate the
banking system in their country and control all banking business. In china 97% of bank owned by
central government and by the state government
Central
Government
State
Government
Privately
Owned
11 Banks 18 Banks 3 Banks
Source: Wikipedia

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2.5.2 Financial Structure of China
Below is the Financial System Architecture of the china which explains how each department is
interrelated with each other.
Source https://www.imf.org/external/pubs/ft/scr/2011/cr11321.pdf
Bank Non- Performing Loans
Non Performing Assets are those assets in which interest or installment has not been paid for
more than 6 months. Banking sector in china is growing every year and their NPA is decreasing
each year which means bank is able to recollect its loans given to public or corporate which
implies a strong policy is made by their central banks.

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Bank nonperforming loans to total gross loans (%)
Country
Name 2010 2011 2012 2013 2014 2015
China 1.132370451 0.961586 0.953674 0.999703 1.248733
United
Kingdom 3.954833788 3.961868 3.586284 3.111742 1.757659
India 2.386132864 2.670195 3.373954 4.027729 4.34585 4.2312
United
States 4.4 3.8 3.3 2.452391 1.850712 1.71379
Source: World Development Indicators
When it comes to external funding of a banking sector in china than in china banks funds their
most of the money from the depositors around 60% is funded by depositors and 30% around by
loans. It means banking structure in china is very vast and the depositors rely on their banks and
deposit most of the money into banks which bank use and invest in other sources.
Source: the people bank of china
In above data, the funding structure of china has been showed and in china banking structure has
dominated their financial structure a lot as compared to other developed countries. It means bank
has a strong financial position in their financial structure which has shown in below diagram.

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Source: Wikipedia
Credit Intermediation 2013
Capital markets (in trillions
USD$)
Sector Bank Credit Stoc
k
Fixed Income Insurance Asset Management
Companies
Size(China) 10.7 3.7 3.4 1.2 0.4
Size(US) 7.6 18.7 38 4.8 36
% GDP China 128% 44% 41% 14% 5%
% GDP US 48% 118% 240% 32% 230%
Source: people republic of china
Headquarters Beijing and Shanghai
Established 1-Dec-48
Governor Zhou Xiaochuan
Central bank of People's Republic of China
Currency Renminbi (RMB)
CNY (ISO 4217)
Reserves US$3.201 trillion[1]
Bank rate 6.00%
Interest on reserves 3.50%
Preceded by Central Bank of the Republic of China
Website www.pbc.gov.cn

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Above diagram clearly shows how dominant is china banking structure in their country as
compared to USA banking structure dominance. With high dominance the banking structure has
128 % contribution in their GDP in china.
2.5.3 Below the TOP banks in china.
Rank Bank name
Total assets
(US$ billion)
1 Industrial and Commercial Bank of China 3,616.39
2 China Construction Bank Corporation 2,939.15
3 Agricultural Bank of China 2,816.60
4 Bank of China 2,629.31
5 China Development Bank 1,613.20
Source Wikipedia
Below the details of Central Bank of the Republic of China which shows some old facts about
the central bank including headquarter, establishment and many more.
2.6 United States of America (USA) Banking Structure
2.6.1 Federal Reserve System History
Before coming of a Federal Reserve System there were two banks in United States which had
tenure of 20 years each. First bank has tenure between 1791-1811 and the second bank has
tenure between 1817-1836. Both banks is responsible for issue currency, accept the deposit
from the general public, purchase and sell securities more or less they are working as a fiscal
agents for a US treasury.
In Nov, 1910 the secret meeting took place which have 6 bankers and economy policy makers
who represented financial elite of the western world. It was hosted at the JP Morgan State Jekyll
Island in Georgia and in attendance was Senator Nelson w Aldrich, Abram haytt junior (assistant
secretary of the treasury), Frank vandella (president at national city bank of new York), Henry P
Davidson (Senior partner JP Morgan & Com), Charles Dean Nortan (President of the first
national bank of new York), Paul Warburg (Director Of wells Fargo) and the Benjamin
Strong(Emissary for J&P Morgan) and coincidentally the First president of the Federal Reserve.
The meeting held was so secret that no one knows about that and then drafts a Federal Reserve

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Act. On Dec 23, 1913 the Act was signed into Law by President Woodrow Wilson’s.
Source: Wikipedia
2.6.2 Structure of Federal Reserve System

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There are three levels in Federal Reserve System. At the Top level there is a Board of Governor
with his chairman and the Federal open market committee and the federal advisory council. In
the middle level it consists of 12 Federal Reserve banks located throughout the US and in the
bottom there is a third level consists of thousands of member banks located throughout the US
and the American people. Board of Governor consists of 7 members were appointed by the
president for 14 year term and they are not responsible for the re-appointment and presidents
also appoints one of the seven members as the chairman of the board for a term of 4 yrs and
chairman may be reappointed . The board of governor is the main authority and responsible for
creating and implementing monetary policies in US because the decisions is made by the board
of governor in not required to be approved by the government or even president.
The Federal Reserve System has a power of issue currency and manipulates interest rates and
run secrets Bailouts and the congress and the president is not allowed full oversight over this
powerful organization. The Federal Reserve System is the Private owned body which does
not work under government and is not responsible to disclose their funding and they are
the most powerful organization which works on their own and not under government. It is
also called that the Chairman of the Federal Reserve is the second most powerful person in the
US. The Fed enjoys a monopoly over a creation of nation’s money and credit. The accountings
laws apply to rest of the America do not apply to Fed. From last 100 years Fed are not
completely accountable and transparent to anyone. Fed gives trillions of dollars in bailout and
loan but they never disclosed to whom how much they have paid. In 2009 congress asked the
chairman of the Fed to disclose whom they have paid 2.2 trillions of dollars for bailout but they
refused to tell to them. Many economist called this as a ‘’the biggest robbery ever enacted on
the American people’’.
2.6.3 Working of Federal Reserve System
Suppose if USA needs money so they issue Treasury bonds and sell these T-Bonds to Federal
Reserve and Fed buys this bond out of the money they created out of their thin air and Fed gave

26 | P a g e
money as loans to USA on behalf of T-Bill and then USA pay interest on the money that Fed has
lent to them which means Fed makes money out of nothing. In other words we can say that if
Fed buys a 1000 $ bond by government and after keeping 10 % in reserve they lend rest of the
900 $ in an economy which means that 1000 $ T-Bond is safe in their deposit and 900 $ in loan
proceeds more money in the economy by which total of 1900 $ money is created out of nothing
and this process go on and on and the origin of 1000 $ bond which is created from nothing is
created 10000 $ in an economy. It means that Fed makes money in their office by their
equipment and lends it to US on behalf of T-bonds but not keeping some equivalent value like
gold .In USA bank is free to give up to 90 % of their deposit to public as a loan. The main
primary focus of Fed is on monetary policy mean that how Fed influence Price Stability.
Suppose if supply of money grows and more money available in an economy, than more money
created more demand and by this demand will increase than supply of money which leads to
inflation on the other hand if supply of money decreases the demand will also decrease and in
extreme cases prices will fall and by this the Recession will come.
The main aim of Fed is to stabilize the money in an economy and prevent both inflation and
recession. The proper way that Fed does this is buying and selling of government securities. If
Fed finds that if there is too much money in an economy in circulation which leads to inflation,
it will sell securities and take excess money out of circulation to stabilize economy and if there
is less money in circulation than Fed buy securities this will put money in circulation and again
stabilize economy.
By studying this, we can get to know that in USA the Banking structure works in another way as
compared to other developed banking structure. Below you can find the analysis of the Balance
sheet of the Federal Reserve System with comparison to Balance sheet of RBI. The Federal
Reserve discloses their balance sheet every week on Thursday, around 4.30PM.
2.6.4 Analysis of Balance Sheet of Federal Reserve
Balance Sheet Of Federal Reserve System As on 27 April, 2016 (Millions of
dollars)

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Assets, liabilities, and capital Total
Assets
11,037Gold certificate account
Special drawing rights certificate acct. 5,200
Coin 1,867
Securities, unamortized premiums and
discounts, repurchase agreements,
4,401,115and loans
Securities held outright1 4,233,335
U.S. Treasury securities 2,461,413
Bills2 0
Notes and bonds3 2,461,413
Federal agency debt securities2 27,096
Mortgage-backed securities4
1,744,826
Unamortized premiums on
securities
183,791held outright5
Unamortized discounts on securities
-16,082held outright5
Repurchase agreements6 0
Loans 70
Net portfolio holdings of Maiden
1,714Lane LLC7
Items in process of collection 182
Bank premises 2,222
Central bank liquidity swaps8 0
Foreign currency denominated
20,772assets9
Other assets10 30,557
Interdistrict settlement account 0
Total assets 4,474,665
Assets, liabilities, and capital Total
Liabilities
1,571,140Federal Reserve notes outstanding
Less: Notes held by F.R. Banks 168,538
Federal Reserve notes, net 1,402,602
Reverse repurchase agreements11 267,113
Deposits 2,757,987
Term deposits held by depository
0Institutions
Other deposits held by depository
2,353,257Institutions
U.S. Treasury, General Account 372,499
Foreign official 5,174
Other12 27,056
Deferred availability cash items 842
Earnings remittances due to the U.S.
1,430Treasury13
Other liabilities and accrued
4,654Dividends
Total liabilities 4,434,628
Capital
30,038Capital paid in
Surplus 10,000
Other capital 0
Total liabilities and capital 4,474,665

28 | P a g e
Analysis
Analyzing the balance sheet of the Fed according to the concepts explained in above
banking structure of the USA.
1. First see the total assets number which are 4,474,665 million $ of assets.
2. Bank has a 11 billion $ of Gold certificate account and coins of 1 billion $ which means bank
has extreme less value which can converted into cash.
3. Securities, Repurchase and loans are around 4401 billion $ so this is a big piece of Fed
Balance sheet out of the whole total assets. In above you can see the breakup of these which
shows that the bulk of them are the US Treasury Loans which means these are the loans to
government for up to or more than 10 years. So you can most of the Fed assets are treasuries,
loans to the US.
Assets Amt
U.S. Treasury securities(Notes and bonds) 2461413
Federal agency debt securities 27096
Mortgage-backed securities 1744826
Unamortized discounts on securities outright 183791
Unamortized discounts on securities outright -16082
Loans 70

29 | P a g e
3. Bank premises means the buildings of the Fed which are about 2 billion $. These are small
bunch of assets the most of the assets are US Treasury Loans.
4. Now come to liabilities, so Fed Reserve notes , net of federal reserve bank holdings which
are 1402 billion $ . These are Fed Reserve notes which have been printed and these are liabilities
because the Fed printed these notes and will use them as currency which means if someone
come back and say give the value of these things .
5. Reverse repurchase agreement means Fed used repurchase agreement to borrow from
someone else.
6. The deposits are the main portion in liabilities which are around 2757 billion $ so these are
the deposits which other banks keep with Fed Reserve but the Fed doesn’t pay interest on these
deposits and they can take these deposits and buy treasuries and other securities and get interest
on them and that’s what they are getting free interest and in this way US usually fund their
operations.
Below you can find the balance sheet of the Reserve Bank of India and you relate the Fed
balance sheet analysis with the RBI balance sheet and easily can see the differences between the
working of these two central banks in their country.
2.6.5 TOP BANKS IN USA
Rank Bank name
Total assets
(US$ billion)
1 JPMorgan Chase 2,074.95
2 Bank of America 1,574.09
3 Wells Fargo 1,532.78
4 Citibank 1,356.78
5 U.S. Bank 398.98
Total 4401114

30 | P a g e
3. Company Analysis
Public sector banks are those banks in which government of India has a major stake means more
than 50 % of shares of bank owned by GOI. Currently there are 27 PSB in India which includes
21 nationalized banks + 6 SBI Group (SBI + other 5 associates). In 2011 IDBI and in 2014
Bharatiya Mahila Bank was nationalized.
If we analyze the balance sheet of Public sector banks you will conclude that in Liabilities side
around 5 % is funded by equity, 86 % approx funded by deposits and around 9 % is funded by
borrowings and in asset side Loans and advances has a ratio of around 60 % and rest 40 % is
through Investment, Fixed assets and cash.
3.1 About Central Govt. Plans to merge 27 Public sector banks into 6 Public
Sector Bank
Recently Indian Government came up with an idea which says ‘’Central Plans to merge 27
Public sector banks into 6 Public Sector Bank’’. The main aim of this project is to model the
idea of central government and analyze the possible consolidation of the Indian banking industry
through merger and acquisitions. With consolidation requiring horizontal combinations, a
merger will reduce competition measured by number of firms in the industry. Reduction in the
number of firms usually may lead to a price increase which is not consumer friendly. Yet, there
are situations when a merger may either not lead to price increase or may be necessary from an
alternate strategic perspective.
One situation for which government wants to merge banks is that the Public sector bank already
burdened with bad loans or their NPA is increasing drastically each year. In 2010 Public sector
bank has an NPA of 2.39 %(NPA to total gross loan) , in 2011 PSB has 2.67 % , in 2012 they
has 3.37 % , in 2013 they has 4.03 %, in 2014 they has 4.35 % and in 2015 the gross NPA
reported was 5.43 % which means every year bank are unable to recover their loans from
corporate, public which leads to increase in the NPA of bank and by this the situation of PSB
getting worst every year and because of the NPA the net profit of the bank is also declined by
1.5 % in second quarter of 2016.
Second reason for merger is to have Indian banks on international stage. Measured by total
assets India’s largest bank is State Bank of India which is around 200th rank as per Forbes
internationally. As of 2015 SBI and its associates has an asset of $ 391 billion, around the size
of the 8th
largest bank in the USA which is Bank of New York Mellon has an total assets of
around $ 385 billion. This implies that it would take around SBI and their 5 associates to
become big. If we combined assets of all nationalized bank in India which add up to the $
1301.816 billion which is smaller than the Society Generale Bank, France which alone has a
total assets of around $ 1459.02 billion and has an 20th
rank as per total assets in the world. The
top 4 banks as per total assets are of china as per Dec, 2015 and the one of the top most is
Industrial & Commercial Bank of China with total assets of $ 3426.80 billion. Indian banks are
rather small by international standards and none appear in the top most lists while china has 4
banks in the same list. So for increasing infrastructural and economic development Indian banks
need to increase their scale in the operations.

31 | P a g e
Another reason for merging of banks is to safeguard the depositor’s interest. Banks are taking
deposits from larger section of the society and it is the duty of bank is to secure the depositors
interest. As bank gives loan to public from the deposit itself if NPA will get increase every year
than the bank has to deal with the problem of securing interest of depositors. For instance, the
banks in Cyprus, a member of the European Union, failed to safeguard the interests of the
depositors (The Guardian, 2013, Rankin et al, 2013). The key point to bear in mind is that when
evaluating bank operation and mergers, significant importance has to be given to ensuring
adequate service to depositors and safety of their wealth.
The main concern with the Reserve Bank of India is increasing NPA of Public sector bank. The
RBI has to take some steps in order to decrease NPA of bank so that Public sector performance
can increase. If Banks has high level of NPA then banks are unable or fail to earn interest
because they have lesser funds to give advance and if bank has lesser advance so it will affect
the growth of the country. They all are interrelated as we can say lesser funds will decrease bank
capability to give loans to corporate which means less growth in the economy of the country.
When we compared the NPA of public and private sector bank there is a huge difference in the
numbers. Below you can see the difference which is shown in given table.
Sou
rce
:
http://www.blog.sanasecurities.com
For, the private sector Yes bank is the best performer in terms of NPA followed by HDFC,
Ratnakar, Induslnd banks and many more. On the other hand for PSB(Public Sector Bank),
United bank of india is the worst performer followed by Indian overseas bank, UCO bank,
Allahabad bank etc.
NPA COMPARISION PRIVATE VS
PUBLIC
Public Sector Bank
NPAs (Q3
FY2015)
Private Sector Bank
NPAs (Q3
FY2015)
Corporation Bank 3.27% Yes Bank 0.10%
Dena Bank 3.33% HDFC Bank 0.26%
Central Bank of India 3.58% Ratnakar Bank 0.31%
Oriental Bank of
Commerce 3.68% IndusInd Bank 0.32%
Andhra Bank 3.70% Axis Bank 0.44%
Punjab National Bank 3.82% Karur Vysya Bank 0.73%
Allahabad Bank 3.89% Kotak Mahindra 0.83%
UCO Bank 4.25% South Indian Bank 1.04%
Indian Overseas Bank 5.52% ICICI Bank 1.12%
United Bank of India 8.50% City Union Bank 1.31%

32 | P a g e
In order to tackle with bad loans Reserve Bank of India comes with norms called BASEL III. It
is a updated version of Basel II which bank is following now. For implementation of BASEL III
RBI gives time up to March, 2019. BASEL III is globally regulatory framework which helps
bank to increase their liquidity and decrease their leverage.
3.2 BASEL III
BASEL committee has been formed by the central government in 1974 which includes 10
countries and later in includes 30 countries. Earlier BASEL I and BASEL II was implemented
by banks but after the financial crises in 2008 , BASEL III agreed by committee in Dec 2010.
This regulatory framework is the short coming of BASEL II to create more stable banking
sector. This regulatory framework has been partially implemented by January 2013 and it will
fully implemented by March 2019 in India.
The main aim of the BASEL III
1. Improves the ability of the bank to absorb losses or shocks.
2. Improves risk management and governance.
3. Strengthen bank’s transparency and disclosure.
Major Features of BASEL III
1. Stricter definition of the capital (what qualified to be capital or not).
2. More common equity (Min 4.5 % in lieu of 2%)
3. More Tier 1 capital (6% in lieu of 4%)
4. Additional buffer (called capital conversation buffer) of 2.5% of Risk weightage asset
(RWA).
5. Introduce mandatory Leverage Ratio (Tier 1 capital to total assets of 3% min.)
TIER 1 Capital = Equity + Reserve
TIER 2 Capital means supplementary capital such as:
- Undisclosed Reserve
- Revaluation Reserve
- General loan loss reserve
- Hybrid capital instrument (such as mixture of debt and equity i.e. convertible bonds,
preference shares).
- Subordinate debts
6. Counter cyclical buffer to be used when stressed/ bad times (hence 0%) and keep when health
(up to 3 %).
Brief Difference between BASEL II and BASEL III are:
Required
BASEL
II
BASEL
III
Capital Conversation Buffer - 2.50%
Minimum Ratio of total capital to RWA 8% 10.50%
Minimum ratio of common equity to RWA 2% 4.50%

33 | P a g e
Tier 1 caoital to RWA 4% 6%
Leverage Ratio - 3%
counter cyclical Buffer -
0% to 2.5
%
Leverage Ratio for 8 SIFI in US - 8%
Transitional Arrangements-Scheduled Commercial Banks
(% of RWAs)
Minimum capital ratios
1-Apr-
13
31-Mar-
14
31-Mar-
15
31-Mar-
16
31-Mar-
17
31-Mar-
18
31-Mar-
19
Minimum Common Equity Tier 1 (CET1) 4.5 5 5.5 5.5 5.5 5.5 5.5
Capital conservation buffer (CCB) - - - 0.625 1.25 1.875 2.5
Minimum CET1+ CCB 4.5 5 5.5 6.125 6.75 7.375 8
Minimum Tier 1 capital 6 6.5 7 7 7 7 7
Minimum Total Capital* 9 9 9 9 9 9 9
Minimum Total Capital +CCB 9 9 9 9.625 10.25 10.875 11.5
Phase-in of all deductions from CET1(in %)# 20 40 60 80 100 100 100
* The difference between the minimum total capital requirement of 9% and the Tier 1 requirement can be met
with Tier 2 and higher forms of capital;
# The same transition approach will apply to deductions from Additional Tier 1 and Tier 2 capital. SOURCE: RBI
The Liquidity Coverage Ratio LCR is one of the reform in BASEL III. The main aim of this
ratio is to strengthen the capital and liquidity for banking sector. This ratio enables bank to keep
some liquid amount of assets with them in order to handle stress scenario.
2015 2016 2017 2018 2019
Minimum LCR
requirement 60% 70% 80% 90% 100%

34 | P a g e
3.3 Reason For Government Merging 27 PSB into SIX
Below you can find the reasons for which the government has taking decisions to merge public
sector banks into six.
3.3.1 Indian Banks on International Stage
India is one the growing economy in the world and it holds 3rd
position in terms of PPP
(Purchasing Power Parity) and in terms of GDP it holds 10th
position as per The World Factbook
(sector composition) in 2014. When we see below numbers it shows India presence in at the
international stage but when it comes to the ranking of the Public sector banks in world than
India stands no-where.
Measured by total assets India’s largest bank is State Bank of India which is around 200th rank
as per Forbes internationally. As of 2015 SBI and its associates has an asset of $ 391 billion,
around the size of the 8th
largest bank in the USA which is Bank of New York Mellon has an
total assets of around $ 385 billion. This implies that it would take around SBI and their 5
associates to become big. If we combined assets of all nationalized bank in India which add up
to the $1301.816 billion which is smaller than the Society Generale Bank, France which alone
has a total assets of around $ 1459.02 billion and has an 20th
rank as per total assets in the world.
The top 4 banks as per total assets are of china as per Dec, 2015 and the one of the top most is
Industrial & Commercial Bank of China with total assets of $ 3426.80 billion. Indian banks are
rather small by international standards and none appear in the top most lists while china has 4
banks in the same list. So for increasing infrastructural and economic development Indian banks
need to increase their scale in the operations.
So the steps of government towards merging is the main reason to make Indian banks on
international stage.
By internationalization banks are able to increase in their deposits which help to increase the
Lending capacity of banks worldwide. By increasing deposits banks are able to increase their
profits which in kind help banks to spread their business in more and more countries and
banking lending capacity will increased which help banks to earn more interest.
When PSB comes on a internationalization stage, bank will able to serve more foreign
customers which in kind deposit their money in these banks and which help banks to increase
their deposits by which banks able to provide highly efficient financial services to all
customers around the world.
This is explained by below data of Bank of Baroda.
Rank Country
GDP (millions
of $)
Agriculture Industry Services Year
GDP Share GDP Share GDP Share GDP Sector
10 India 2,048,000 366,592 17.9 495,616 24.2 1,185,792 57.9 2014 2014

35 | P a g e
Bank of Baroda is an international bank having presence at international country. The BOB has
an 5333 branches in India and 106 branches in abroad which includes 24 countries and in
United Aram Emirates they have 17 branches and in USA & China they have only 1 and rest in
other countries.
But the thing is that the bank has almost 1-2 branches in Developed countries where the growth
in banking sector is excellent. If you see world top 10 banks China has USA 4-4 banks each
which shows the banking sector can grow if they got internationalization. So, for this RBI wants
to merge 27 PSB into 6 so that they can come the level of banks at developed countries and can
give more competition to top banks in developed countries.
Below data show growth of BOB in domestic and globally.
Deposits
Year Domestic
Domestic per branch(5333
branch) Overseas
Overseas per
branch(106 branch)
%
Rs crore Rs Crore Rs Crore Rs Crore
2010 185500.25 34.78347084 55,761.68 526.05
2011 233323.30 43.75085318 72,116.18 680.34
2012 280135.26 52.52864429 104735.85 988.07
2013 341705.59 64.07380274 132177.74 1,246.96
2014 379054.04 71.07707482 189840.35 1,790.95
2015 414277.85 77.681952 203281.68 1,917.75
Deposits source: annual report
BOB
0
50000
100000
150000
200000
250000
300000
350000
1 2 3 4 5 6
RS
Deposits
Domestic Rs Crore
Overseas Rs Crore

36 | P a g e
In above chart you can able to related the increase in deposits of BOB in domestic and Overseas
and in domestic each branch has an deposit of average 77 cr. and when it comes to overseas the
bank has an average deposit of 1917 cr. If one branch is earning around 1900 cr if bank opens
more branches then the number will increasing drastically which in turn help banks to increase
their total assets and can compete with top banks in the world.
Advances
year Domestic
Domestic per branch(5333
branch) % Overseas
Overseas per
branch(106 branch)
%
Rs Crore Rs Crore Rs Crore Rs Crore
2010 131643.62 24.68472155 43,391.66 409.36
2011 169407.86 31.76595912 59,268.50 559.14
2012 202075.39 37.89150384 85,301.90 804.73
2013 224294.33 42.05781549 103891.44 980.11
2014 272168.96 51.03486968 124836.85 1,177.71
2015 291870.22 54.72908682 136194.92 1,284.86
source: annual report BOB
In china the Industrial & Commercial Bank of China Ltd. (ICBC) is the bank who expands their
business worldwide very aggressively. By end 2012 ICBC’s global service connected 383
branches in 39 countries spreading over 6 continents of Asia, Africa, Latin America, Europe,
America and Australia, the largest overseas branch network by a Chinese bank and it is One of
top most bank, holding a 1st
rank worldwide in terms of total assets of $3616.39 billion in 2015.
ICBC overseas branches are granted banking licenses to perform full banking services. Most of
0
50000
100000
150000
200000
250000
300000
350000
1 2 3 4 5 6
RS
ADVANCES
Domestic Rs Crore
Overseas Rs Crore

37 | P a g e
the branches not only are allowed to offer commercial banking services but also full-
service or partial- service investment banking and other financial services.
In going Global, bank will implement those policy which leads to sustainable and balanced
growth in order to achieve stable performance. Stable performance helps banks in growth which
in turn helps in economic development of a country. By increasing growth in Banking sector
the GDP will increase which in turn help in economic development of a country and also
helps in development of new resources and capabilities.
Internationalization helps in the business opportunities which help them to use newer
technology and get to know invention of new technology in their sectors through
internationalization. The larger the size, the larger the transactions that must be initiated by the
bank. The internationalization will help bank to increase their value in the stock market.
Because internationalization will help to grow business and in turn the stock prices will also
increase and will help bank to increase their market capitalization worldwide.
Internationalization provides customers lots of facility and makes their functioning in bank
easily and fast. Through merging and internationalization the Indian bank able to increase their
branches worldwide and also the numbers will get to increase a lot which helps customers to
process their transactions easily and fast and the exchange of currency from one branch to
another will get easier and it will going to benefit their customers which helps bank to increase
their customer base worldwide.
Growth of bank is more at international stage because each country has different banking norms
in their country for functioning of bank. When we compared lending capacity of a bank in India
and USA. In India, banking sector has lots of norms and around 30 % of their total deposits they
have to keep reserve with RBI and themselves for handling worst situation if arises but when we
see the lending capacity of a bank in USA their norms say that the bank has to keep only 10%
reserve with them and 90% deposits they can lend to customers or corporate as a loan which
help bank to earn more profit and lots of other policies are there such as Repo rate, Interest rate
taxes and many more which help banks to expand fast.
So, above facts and figures has explained you the reason for getting Indian banks into a stage of
internationalization.

38 | P a g e
3.3.2 Increasing In NON-Performing Assets
Acc. to Reserve bank of India, NPA or Non-Performing Asset are those asset or bad loans of the
banks on which customers are unable to pay interest for more than 90 days from the end of
particular quarter is called a Non-Performing Asset . NPA is calculated as:
NPA%= NPA Amount
Total Advances
Banks are required to classify their NPA into 3 categories.
1. Sub-standard asset- If an account remains as NPA for a period less than or equal to 12
months
2. Doubtful asset- An asset would be classified as doubtful if it has remained in the substandard
category for 12 months
3. Loss assets- A loss Asset is one where loss has been identified by the bank’s internal or
external auditors or upon an RBI inspection.
4. Standard Asset: Those asset which are classified as NPA.
Generally, bank define NPA in their report in 2 forms
1. Gross NPA
2. Net NPA
Gross NPA :
Gross NPA is the amount outstanding other than interest which has been recorded and not
debited in the account. In calculation of Gross NPA provision is not taken into consideration.
Net NPA :
It is the amount of Gross NPA minus interest debited, provision amount and amount of claim
received and not appropriated.
Public sector banks in India have performed poorly in terms of NPA from the past 5 years. Most
of the amount of NPA has been brushed into the carpet and banks are unable to recover them.
Indian express filled an RTI in view to know the bad loans amount in 2012, the RBI told that
bad debts stood up to Rs 15,551 cr in 2012 and it will raise up to three times and will be around
RS 52,542 Cr IN 2015.
In India NPA is increasing very fast as compared to other countries like USA and china their
NPA is decreasing each year but in India it is growing from the last 5 years. Below data will
reflect you the growth in NPA in India and other countries.
Bank nonperforming loans to total gross loans (%)
Country Name 2010 2011 2012 2013 2014 2015

39 | P a g e
China 1.13 0.96 0.95 1.00 1.25
United
Kingdom 3.95 3.96 3.59 3.11 1.76
India 2.39 2.67 3.37 4.03 4.35 4.23
United States 4.40 3.80 3.30 2.45 1.85 1.71
Source : World Development Indicators
In the above chart you can analyze the growth on NPA in India from 2010 to 2015 which means
PSB are failing in their strategies and because of this they are unable to recover the loans and the
result will affect in their increasing their NPA. In developed countries the NPA are decreasing
because of the strong policies they have implemented in their banking structure which shows the
difference between the policies in banking structure.
Already burdened by bad loans , 27 banks, led by public sector has recorded an increase in 26%
in their NPA over the current year. There is a 10% increase from 16.9 % grown in the NPA
from
Last year. Even the Top banks in public sector has very high NPA and their NPA is also
increasing rapidly .
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
1 2 3 4 5 6
China
United Kingdom
India
United States

40 | P a g e
The above table shows you the Increase in NPA from last quarter to this year quarter and the
worst performer is Punjab national Bank with Rs 24,945 Cr bad loans.
One situation for which government wants to merge banks is that the Public sector bank already
burdened with bad loans or their NPA is increasing drastically each year. In 2010 Public sector
bank has an NPA of 2.39 %(NPA to total gross loan) , in 2011 PSB has 2.67 % , in 2012 they
has 3.37 % , in 2013 they has 4.03 %, in 2014 they has 4.35 % and in 2015 the gross NPA
reported was 5.43 % which means every year bank are unable to recover their loans from
corporate, public which leads to increase in the NPA of bank and by this the situation of PSB
getting worst every year and because of the NPA the net profit of the bank is also declined by
1.5 % in second quarter of 2016.
The main concern with the Reserve Bank of India is increasing NPA of Public sector bank. The
RBI has to take some steps in order to decrease NPA of bank so that Public sector performance
can increase. If Banks has high level of NPA then banks are unable or fail to earn interest
because they have lesser funds to give advance and if bank has lesser advance so it will affect
the growth of the country. They all are interrelated as we can say lesser funds will decrease bank
capability to give loans to corporate which means less growth in the economy of the country.
An analysis report is held by the RBI in 2012-2013 which shows that the between 2009-2013 the
advances to general public and the corporate and also the amount of bad debts has doubled.
From0.33% of total advances in 2009 and the bad debts has also increased to 0.61%.
In fact, if these NPA will get increase each year then in immediate future we are going to see a
meltdown of Banking system in India very much like banks like Citibank had to be saved by U.S
Govt. in 2008 economic meltdown.

41 | P a g e
If bank has high NPA than bank has to go through with below implications :
If bank has level of NPA than bank in result have less funds i.e lesser funds will disable bank
lending capacity by which the bank net profit will decrease. Others impact of high NPA are :
 High level of provisioning (banks are required to keep aside a portion of their operating
profit as provisions, higher NPAs will increase the amount of provision thereby
impacting the profitability);
 Banks will unable to maintain their CAR
 Banks can’t fulfill the BASEL III norms which has to be implemented in each bank has
the RBI governor has gives deadline to banks in order to recover their NPA in next 2-3
years in order to meet the regulation of BASEL III which will get implemented by march,
2019.
 High NPA will increase the Net Interest Margin (NIM);
 Banks competition position will reduce.
3.4 Comparison of NPA of Public and Private Sector
Non Performing Assets (NPAs) in Public & Private Sector Bank
If you compare the NPA of public and private sector bank you will find the lots of difference in
numbers. Most of the private bank has an NPA of below 1 % which shows that bank able to
recover their loans from the public and corporate and this shows the excellent framework of
policies used by these banks as compared to PSB. Both private and public sector bank operating
in India but PSB unable to recover their loans. The best performer in private bank is yes bank
but this bank doesn’t give loans but when it come to HDFC one of excellent bank in private
sector is also has an NPA of 0.26% other top private bank such as Induslnd bank has an NPA of
0.32%, AXIS Bank has an NPA of 0.44% which reflects excellent policies implemented by
private sector in recovering loans.
Due to rise in NPA of public sector bank it affected the profit of the Bank as well. Most of the
PSB has less net profit from last year and the main reason of this is due to rise in NPA every
year. Indian banks has recorded an fall of 85% in its net profit at RS 423 CR when compared
with Rs 277.5 Cr in the year ago period.
The one of the top bank in Public sector which is SBI has recorded an less net profit this year
compared to last year due to increase in bad loans.

42 | P a g e
The above data shows that there is an net loss for 24 PSB is Rs 1091156 crore but there is an
aggregate profit of private bank around Rs1121825 crore.

43 | P a g e
3.5 DATA FACTS & FIGURES

47 | P a g e
source: http://www.firstpost.com/business/explained-in-5-charts-how-indian-banks-big-npa-problem-
evolved-over-years-2620164.html
The above chart analysis gives you detailed information about NPA growth in India in all
sectors of bank and it will tell you how public sector bank has unable to manage their NPA and
because of this their NPA increased every year and how the private bank manage their NPA and
how they able to vanish their name from the list of high NPA banks.

48 | P a g e
3.6 NPA SPLITS IN DIFFERENT SECTORS
In the below table you will find the composition of NPA of different sectors in public sector
banks.
Bank gives loans in three sectors mostly:
1. Priority Sector: These sector consists of loans given for agriculture, small scale industries.
2. Non-Priority Sector: These sectors include loans given to large and medium corporate and
industries.
3. Public Sector: This type of loan given to general public.
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Composition of NPA of SBI & Assoc.
#REF!
NON PRIORITY SECTOR
PRIORITY SECTOR
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Composition of NPA of Public Sector
#REF!
NON PRIORITY SECTOR
PRIORITY SECTOR

49 | P a g e
COMPOSITION OF NPAs OF PUBLIC SECTOR BANKS
(Amount in ` Billion)
As on March 31
Bank
Group/Years
PRIORITY SECTOR
NON PRIORITY
SECTOR
PUBLIC SECTOR TOTAL
Amount Percentage Amount Percentage Amount Percentage Amount
State
Bank of
India &
its
Associates
2015 256.76 34.93 478.32 65.07 0.00 0.00 735.08
2014 261.49 32.76 536.68 67.24 0.00 0.00 798.17
2013 264.42 42.12 361.30 57.55 2.06 0.33 627.79
2012 233.56 48.44 232.71 48.27 15.88 3.29 482.15
2011 155.67 51.22 148.26 48.78 0.00 0.00 303.93
2010 109.29 46.45 125.91 53.51 0.09 0.04 235.29
2009 84.47 45.70 98.60 53.35 1.76 0.95 184.83
2008 89.02 57.50 64.44 41.62 1.36 0.88 154.82
2007 71.75 56.57 52.63 41.49 2.45 1.93 126.83
2006 73.14 58.27 50.52 40.25 1.87 1.49 125.52
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
AxisTitle
Ratio (%) of Priority and Non Priority
Sector NPAs of Total NPA
PRIORITY SECTOR
NON PRIORITY SECTOR

50 | P a g e
2005 62.00 41.84 84.31 56.90 1.86 1.26 148.18
Public
Sector
Public
Sector Amount Percentage Amount Percentage Amount Percentage
Public
Sector 2015 966.11 34.69 1815.98 65.21 2.59 0.09
2784.68
2014 798.99 35.16 1472.35 64.79 1.30 0.06 2272.64
2013 672.76 40.91 960.31 58.39 11.55 0.70 1644.61
2012 557.80 47.57 588.26 50.17 26.56 2.27 1172.62
2011 401.86 53.82 342.35 45.85 2.43 0.32 746.64
2010 304.96 50.89 291.14 48.58 3.14 0.52 599.24
2009 242.01 53.75 205.28 45.59 2.97 0.66 450.26
2008 248.74 61.48 150.07 37.10 5.74 1.42 404.56
2007 225.19 57.96 156.03 40.16 7.32 1.88 388.54
2006 222.36 53.75 182.79 44.18 8.55 2.07 413.70
2005 215.36 45.22 254.94 53.53 5.92 1.24 476.22
Source : Department of Banking Supervision,
RBI.
3.7 Classification of Loan assets of Banks
Bank wise classification of loan assets of Banks – 2008 to 2013
Bank wise classification of loan assets of Banks – 2008 to 2013
Bank group /
Year
As on March 31
Standard Advances
Sub-Standard
Advances Doubtful Advances
Amount Per cent Amount Per cent Amount Per cent
-1 -2 -3 -4 -5 -6
Public Sector
Banks
2008 16,564.51 97.67 168.46 0.99 190.83 1.13
2009 20,546.01 97.9 195.21 0.93 207.08 0.99
2010 24,551.47 97.72 276.85 1.1 246.79 0.98
2011 29,888.72 97.68 336.12 1.1 319.55 1.04
2012 34,379.00 96.83 603.76 1.7 470.75 1.33
2013 38,999.85 96.16 765.89 1.89 734.85
1.81
Private Sector
Banks

51 | P a g e
2008 4,597.22 97.25 72.81 1.54 44.53 0.94
2009 5,031.87 96.75 105.27 2.02 50.18 0.96
2010 5,677.23 97.03 86.78 1.48 65.43 1.12
2011 7,149.78 97.55 44 0.6 107.36 1.46
2012 8,628.96 97.92 51.33 0.58 103.16 1.17
2013 10,266.73 98.09 58.54 0.56 110.69 1.06
Foreign Banks
2008 1,598.82 98.09 19.63 1.2 7.68 0.47
2009 1,624.20 95.7 58.74 3.46 10.04 0.59
2010 1,603.11 95.74 49.3 2.94 14.41 0.86
2011 1,942.57 97.46 18.65 0.94 21.13 1.06
2012 2,284.40 97.32 20.78 0.89 22.32 0.95
2013 2,606.39 97.03 28.82 1.07 27.51 1.02
Source : Department of Banking Supervision, RBI.
Standard Advances
0
100
200
300
400
500
600
700
800
1 2 3 4 5 6
Public Sector Banks
Private Sector Banks
Foreign Banks

52 | P a g e
Sub-Standard Advances
Doubtful Advances
0
100
200
300
400
500
600
700
800
1 2 3 4 5 6
Public Sector Banks
Foreign Banks
0
100
200
300
400
500
600
700
800
1 2 3 4 5 6
Public Sector Banks
Foreign Banks

54 | P a g e
4. Project Specific Analysis
4.1 About Consolidation of Banks & Methodology used For Clubbing
According to reports, the government will identify Six Big Public sector banks and will make
them as a key banker and small banks will get merge with these Anchor banks. These banks
given a name of ANCHOR BANKS and these banks will be recognized by the government
expert panels and the committee by the end of 31 October, 2016. The Bank Board Bureau(BBB)
will also play a key role in making consolidation of public sector banks with the expert panels.
As per my knowledge in banking sector , the six main banks will be decided on the basis of size
of balance sheet means highest banks which have highest figures in balance sheet will be
consider as Anchor banks. On this basis the six banks will be as.
1. State Bank of India is in the first position in India in public sector as per their total assets of
Rs 2048079.80 crore.
2. Bank of Baroda holds second position on basis of total assets.
3. Bank of India holds third position on basis of total assets.
4. Punjab National Bank holds fourth position on basis of total assets.
5. Canara Bank holds fifth position on basis of total assets.
6. Union Bank of India holds sixth position on basis of total assets.
Ranks Banks Total Assets Mar 2015 crore
1 State Bank of India (SBI) A 2,048,079.80
2 Bank of Baroda 714,988.55
3 Bank of India 618,697.76
4 Punjab National Bank 603,333.60
5 Canara Bank 548,000.56
6 Union Bank of India 381,615.93
On the basis of Total assets we can identify the main six anchor banks or the lead banks and rest
banks will get consolidated with these banks. During the latest ‘Gyan Sangam’ bankers’ held at
Gurgaon in March where the consolidation topic is discussed widely between officials which
includes top ministry, bankers, RBI officials and many more. The main question arises on what
basis or on what key points the merging will be done? Many experts come with their
combinations and most of the combination is done on the basis of total assets but I disagree with
the combinations based in total assets. For consolidation you cannot deny the geographical,

55 | P a g e
human resources preferences which are a key point which should be taken care before making
any combinations of banks.
Consolidation among public sector has been in discussion from several years and the UPA
government also comes with these proposals but it didn’t reach up-to final stage due to various
issue like political, technological and many of the banks are not ready for consolidation at that
time.
As per my knowledge to industry I have made a combination of banks as per Geographical
synergy. Geographical synergy is the main component will be taken into consideration because
banks with different geographical can bring national kind of entity and it will help bank to
increase their geographical region.
As per below Geographical Aspects the combinations is made :
North Region: Delhi, Punjab, UP, UK, J&K, Himachal Pradesh, Haryana
East & North East India: Orissa, west Bengal, Bihar, Jharkhand, Assam, Tripura, Manipur
West & central India: Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa
South India: Andhra Pradesh, Telengana, Karnataka, Tamil Nadu, Kerala

56 | P a g e
Some other aspects are also taken into consideration before making these combinations such as:
Deposits Region Wise of PSB
Source RBI DATA chart 1
Credits Region Wise of PSB
Source RBI DATA chart 2
Below you can find the combinations of banks on the basis of above aspects and the below
combinations truly based on my understanding and is not based on rigorous methodology.
NORTHERN
REGION
15%
EAST AND
NORTH EAST
19%
West & Central
India
38%
SOUTHERN
REGION
28%
Deposits
NORTHERN
REGION
23%
EAST AND
NORTH EAST
8%West & Central
India
42%
SOUTHERN
REGION
27%
Credits

57 | P a g e
Below you find six combinations and mostly weight age is given to geographical aspect because
the combinations is made in such a way so that every bank has presence overall India and there
should not be any monopoly enjoy by any bank in specific region.
Now-a-days you can find many combinations on basis of their methodology but the final
combinations have to be decided by banks by keeping various aspects in mind. The main key
points that Committee or expert panel will take into considerations are as follows:
1. Geographical aspect
2. Balance sheet size aspect
3. Human resource aspect
4. Political aspect
5. Regional political aspect
6. Bankers aspect and their views on the consolidation.
7. Some small aspects are also will be taken care during combinations by various parties
involved in this.

58 | P a g e
4.2 Combination 1
State Bank of India (Anchor Bank)
 State Bank of Hyderabad
 State Bank of Patiala
 State Bank of Travancore
 State Bank of Bikaner & Jaipur
 State Bank of Mysore
4.2.1 Reason For the Merger
Above combinations is one of the easiest combinations and every expert panel will make this
combination surely and even SBI will take interest in merging with their associate banks. There
should not be any doubt in this combinations and even every bank analyst are making this
State Bank of
India (SBI)
79%
State Bank of
Hyderabad
6%
State Bank of Patiala
4%
State Bank of
Travancore
4%
State Bank of
Bikaner & Jaipur
4%
State Bank of Mysore
3%
Total Asset Mar 2015

59 | P a g e
combinations. The benefit with these combinations is that there is same work culture, economic
aspects, the way of working all are same in these combination.
State Bank of India (SBI) OVERALL Presence
State Bank of Hyderabad South
State Bank of Patiala North
State Bank of Travancore South
State Bank of Bikaner &
Jaipur
West & Central India
State Bank of Mysore South
As per above data you can analyze that SBI has presence overall India and its merging with
other associated banks will make SBI more stronger in India and specially in south because out
of 5 associate banks 3 have strong presence in South India which present SBI more stronger in
specially in south region.
4.2.2 Synergies Related to this Merger
Increase in Total assets:
Banks Total Assets crore Mar 2015
State Bank of India (SBI) 2,048,079.80
State Bank of Hyderabad 154502.7841
State Bank of Patiala 116709.1
State Bank of Travancore 105,595.43
State Bank of Bikaner & Jaipur 102,301.54
State Bank of Mysore 79,468.93
TOTAL 2,606,657.58
Source BALANCE SHEET OF BANK
If we merge SBI and other associates, then the total asset size of SBI will be around $ 385.78
billion dollar according to the financial of 2014-2015 and as per moving average method it is
estimated that in 2015-2016 the asset size will be around $ 445-450 billion dollar and in 2017-
2018 it will be around $ 600 billion dollar if they get merge and in next 4-5 years it is estimated
that SBI can be in top 30 bank in the world and with this larger size of assets SBI can hold a
position of around 53rd
bank all over the world as per total asset size and can compete banks with
international standards. This combination holds the first rank overall six combinations and it will

60 | P a g e
be much higher in terms of total assets as compared to other 5 combinations. Other common
synergies will be discussed after all combinations.
4.3 Combination 2
Canara Bank (Anchor Bank)
 Allahabad Bank
 Indian Overseas Bank
 Syndicate Bank
4.3.1 Reason for the Merger
Banks Region
Canara Bank
40%
Allahabad Bank
17%
Indian Overseas
Bank
21%
Syndicate Bank
22%
Total Assets Mar 2015

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Canara Bank Overall India
Allahabad Bank North
Indian Overseas Bank West, central India & South India
Syndicate Bank South
In above combination, the Canara Bank which is a Anchor bank has an overall presence in India
and the merger banks such as Allahabad Bank which has a strong influence in North India,
Indian Overseas Bank strongly influenced in west & central India and south India and Syndicate
Bank has strong influence in south India. So this merger has cover all over India from north to
south , east to west.
Banks Total Assets Mar 2015
Canara Bank 548,000.56
Allahabad Bank 227,096.48
Indian Overseas Bank 285,636.98
Syndicate Bank 303,135.25
Total 1,363,869.27
If we merge Canara Bank and other small banks, then the total asset size of this merger will be
around $ 201.85 billion dollar as per balance sheet Mar 2015 and as per moving average
method it is estimated that it will reach up to $ 235 billion dollar as per their total asset size up to
Mar 2016 and with this it can hold a position around 88-92 rank all over the world which means
this merger will help this bank to comes under top 90 banks all over world as per their total asset
size.

62 | P a g e
4.4 Combination 3
Union Bank of India (Anchor Bank)
 IDBI Bank Ltd
 Oriental Bank of Commerce
 Central Bank of India
Banks Region
Union Bank of India North
Oriental Bank of Commerce North
IDBI Bank Ltd. North & West, central India
Central Bank of India North & West, central India
In above combination the strong preference is given to north side and west side because in the
Chart number 4 & 5 of deposits and credits you can see the deposits is less in north, so to
enhance the deposit capacity of bank in northern region this combination is made and the credit
Union Bank of
India
30%
Oriental Bank of
Commerce
18%
IDBI Bank Ltd.
28%
Central Bank
of India
24%
Total Assets Mar 2015

63 | P a g e
taking capacity is more in northern region , deposit is less but the credit is more so the northern
people take more loans as compared to their deposits so it is merge with those banks which has
high strong influence in west and north because the deposit capacity in west is very high and
after merging the bank lending capacity will increase. So on this basis the combination is made
to increase the deposit in northern region and to merge with banks which has high strong
influence in west & central India will increase the lending capacity of banks in northern region.
This combination will cover North, West &central India.
Synergies Related to this Merger
Banks Total Assets Mar 2015
Union Bank of India 381,615.93
Oriental Bank of Commerce 230,513.58
IDBI Bank Ltd. 356,030.57
Central Bank of India 311,940.50
TOTAL 1,280,100.58
If we merge Union bank of India with other banks, then the total assets of this merger will be
around $ 189.45 billion dollar as per mar 2015 and if we estimate this data in future years as per
moving average so it is concluded that the total asset size of this bank will be around $ 225
billion dollar in Mar 2016 and in coming years we can see this combination in top 100 banks in
the world. This combinations hold 3rd
rank in India in PSB.

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4.5 Combination 4
Bank of Baroda (Anchor Bank)
 Vijaya Bank
 Bharatiya Mahila Bank
 United Bank of India
 Corporation Bank
Banks Total Assets % of Total Assets Mar 2015
Bank of Baroda 714,988.55 59.16353182
Vijaya Bank 142,643.09 11.80336244
Bharatiya Mahila Bank 1,843.1423 0.152515461
United Bank of India 123,027.58 10.18022756
Bank of Baroda
59%
Vijaya Bank
12%
Bharatiya Mahila
Bank
0%
United Bank of India
10%
Corporation Bank
19%
% of Total Assets Mar 2015

65 | P a g e
Corporation Bank 225,993.02 18.70036272
Total 1,208,495.38 100
Banks Region
Bank of Baroda North, East, North East & West
Vijaya Bank South
Bharatiya Mahila Bank North
United Bank of India North, East & North East
Corporation Bank North
In above combination Bank of Baroda is the anchor bank and it is the second largest bank in
terms of total asset size in Public sector and has a strong influence in North, West & East-North
and Bharatiya Mahila bank and corporation bank is strongly influenced in north region and other
banks are in south and east. So the whole combination will cover all over India and will get
benefit from all over region.
Banks Total Assets
Bank of Baroda 714,988.55
Vijaya Bank 142,643.09
Bharatiya Mahila Bank 1,843.1423
United Bank of India 123,027.58
Corporation Bank 225,993.02
TOTAL 1,208,495.38
If we go ahead with this combination and bank of Baroda will be an anchor bank and after
clubbing this combination will have total assets of $ 178.85 billion dollar and in coming years it
is estimated to increase by 15 % in 2015-2016 and after merging it is estimated that will grow
around 20%. So in coming next 3-5 years this bank will also go head in top 100 banks all over
the world.

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4.6 Combination 5
Punjab National Bank (Anchor Bank)
 Bank of Maharashtra
 Indian Bank
 UCO Bank
Banks Region
Punjab National Bank North
Bank of Maharashtra West & Central India
Indian Bank South
UCO Bank East and North East India
Punjab National
Bank A
51%
Bank of
Maharashtra WEST
12%
Indian Bank south
16%
UCO Bank east
21%

67 | P a g e
In above combinations the PNB is a anchor bank and having a strong influence in Northern
region and other banks have strong presence in West , central India, south , east and North east
India and if this merger go ahead then the this combination can cover whole India and all
regions.
Banks Total Assets
Punjab National Bank 603,333.60
Bank of Maharashtra 146,018.79
Indian Bank 192,835.97
UCO Bank 245,916.91
Total 1,188,105.27
If we club these banks and go ahead with the merger than the total assets will be around $
175.839 billion dollar as per Mar 2015 and in near future is going to increase widely because of
the merger. This will help bank to increase size of the balance sheet and increase in lending
capacity.

68 | P a g e
4.7 Combination 6
Bank of India (Anchor Bank)
 Punjab & Sind Bank
 Dena Bank
 Andhra Bank
Bank of India A
60%
Punjab & Sind
Bank NORTH
9%
Dena BANK WEST
13%
Andhra
Bank
SOUTH
18%

69 | P a g e
Banks Region
Bank of India East and North East India
Punjab & Sind Bank North
Dena Bank West & Central India
Andhra Bank South
In above combination the anchor bank is Bank of India which has a strong region in East and
north east and other banks has strongly influenced in North, West and central India and South.
This combination will cover all regions in India and can grow their business all over India.
Banks Total Assets
Bank of India A 618,697.76
Punjab & Sind Bank NORTH 97,753.40
Dena BANK WEST 129,920.55
Andhra Bank SOUTH 185,170.35
Total 1,031,542.06
If we go ahead with this combination then the total assets will be around $ 152.66 billion dollar
and it will be the sixth largest bank in India in public sector.

70 | P a g e
4.8 Combination Effects on Financials
4.8.1 Each Combination with Strong Influence in Region
COMBINATION 1 Region COMBINATION 4 Region
State Bank of India (SBI)
Anchor Bank OVERALL India
Bank of Baroda Anchor Bank
North, East, west,
Northern East, Central India
State Bank of Hyderabad South India Vijaya Bank South India
State Bank of Patiala North Region Bharatiya Mahila Bank North Region
State Bank of Travancore
South India
United Bank of India
North Region , East & Northern
East
State Bank of Bikaner &
Jaipur West & Central India
Corporation Bank
North Region
State Bank of Mysore
South India
Canara Bank Anchor
Bank OVERALL India
Punjab National Bank
Anchor Bank North Region
Allahabad Bank North Region Bank of Maharashtra West & central india
Indian Overseas Bank
South India, West &
central india
Indian Bank
South India
Syndicate Bank South India UCO Bank East & Northern East
Union Bank of India
Anchor Bank North Region
Bank of India Anchor Bank
East & Northern East
Oriental Bank of Commerce
North Region
Punjab & Sind Bank
North Region
IDBI Bank Ltd. North
North Region , West &
central india
Dena Bank
West & central india
Central Bank of India
North Region , West &
central india
Andhra Bank
South India

71 | P a g e
State
Bank of
India
(SBI)
Anchor
Bank
State
Bank of
Hydera
badState
Bank of
Patiala
State
Bank of
Travanc
ore
State
Bank of
Bikaner
&
Jaipur
State
Bank of
Mysore
COMBINATION 1
Canara
Bank
Anchor
Bank
Allahab
ad Bank
Indian
Oversea
s Bank
Syndicat
e Bank
COMBINATION 2
Union
Bank of
India
Anchor
Bank
Orienta
l Bank
of
Comme
rce
IDBI
Bank
Ltd.
North
Central
Bank of
India
COMBINATION 3
Bank of
Baroda
Anchor
Bank
Vijaya
Bank
Bharati
ya
Mahila
Bank
United
Bank of
India
Corpora
tion
Bank
COMBINATION 4
Punjab
National
Bank
Anchor
Bank
Bank of
Maharas
htra
Indian
Bank
UCO
Bank
COMBINATION 5
Bank of
India
Anchor
Bank
Punjab
& Sind
Bank
Dena
Bank
Andhra
Bank
COMBINATION 6

72 | P a g e
4.8.2 Consolidated Financial Data
In above table contains the consolidation balance sheet of each combination in which some
important aspects have shown which is necessary to look after merger. You can identify that the
SBI and associates with combination is higher in all.
Amt in Crore
Combination
1
SBI &
Associates
Combination
2
CANARA
BANK &
OTHERS
Combination
3
UNION
BANK OF
INDIA &
OTHERS
Combination
4
BANK OF
BARODA &
OTHERS
Combination
5
PUNJAB
NATIONAL
BANK &
OTHERS
Combination
6
BANK OF
INDIA AND
OTHERS
COMBINE
ALL
Total Total
TOTAL TOTAL Total TOTAL
ALL SIX
COMBINE
Particulars 2014-2015 2014-2015 2014-2015 2014-2015 2014-2015 2014-2015 2014-2015
Total Assets 2,606,657.58 1,363,869.27 1,280,100.58 1,208,495.38 1,188,105.27 1,031,542.06 8,678,770.15
Loans &
Advances 1,674,016.54 854,388.19 797,770.27 726,941.89 752,347.92 670,784.76 5,476,249.57
Reserve &
Surplus 159,481.58 63,084.43 65,592.59 59,199.35 65,888.17 52,317.07 465,563.19
Net Profit/loss 24,560.64 4,755.15 3,759.93 4,707.09 8,698.06 4,369.70 50,850.56
No. Of
Branches 23078 15,723.00 12,738.00 11,270.00 13,872.00 10,594.00 87,275.00
No. of
Employees 282915 139,296.00 111,308.00 97,835.00 128,009.00 86,637.00 846,000.00
NET NPA RS 36,304.06 28,375.96 24,534.73 18,282.66 29,000.60 20,844.42 157,342.43
Net NPA % 2.17 3.32 3.08 2.52 3.85 3.11 2.87
GROSS NPA
RS 74,347.54 42,762.75 45,255.06 32,363.83 48,032.41 36,545.01 279,306.60
Gross NPA % 4.44 5.01 5.67 4.45 6.38 5.45 5.10
Deposits 2,041,044.32 1,168,700.97 1,036,287.98 1,052,817.38 1,007,059.56 889,569.67 7,195,479.88

73 | P a g e
4.8.3 DATA Facts & Figures
Below chart shows the % of contribution of each combination in total assets, Loans & Advances,
Net profit, Net NPA and deposits.
State Bank of India
(SBI) Combination
1
30%
Canara Bank
(Combination 2)
16%
Union Bank of
India (Combination
3)
15%
Bank of Baroda
(Combination 4)
14%
Punjab National
Bank (Combination
5)
13%
Bank of India
(Combination 6)
12%
Total Assets
State Bank of India
(SBI) Combination
1
31%
Canara Bank
(Combination 2)
16%
Union Bank of
India (Combination
3)
14%
Bank of Baroda
(Combination 4)
13%
Punjab National
Bank (Combination
5)
14%
Bank of India
(Combination 6)
12%
Loans & Advances

74 | P a g e
State Bank of India
(SBI) Combination 1
48%
Canara Bank
(Combination 2)
9%
Union Bank of India
(Combination 3)
8%
Bank of Baroda
(Combination 4)
9%
Punjab National
Bank (Combination
5)
17%
Bank of India
(Combination 6)
9%
Net Profit/loss
State Bank of India
(SBI) Combination 1
23%
Canara Bank
(Combination 2)
18%
Union Bank of India
(Combination 3)
16%
Bank of Baroda
(Combination 4)
12%
Punjab National
Bank (Combination
5)
18%
Bank of India
(Combination 6)
13%
NET NPA
State Bank of India
(SBI) Combination 1
28%
Canara Bank
(Combination 2)
16%
Union Bank of
India
(Combination 3)
15%
Bank of Baroda
(Combination 4)
15%
Punjab National
Bank (Combination
5)
14%
Bank of India
(Combination 6)
12%
Deposits

75 | P a g e
5. Conclusions & Recommendations
The growth of public sector banks in India is decreasing drastically from last 4-5 years because
of the increasing NPA and other factors and most of the banks reported Net loss in their balance
sheet which shows banks is not able to utilize depositor’s money at best level and if the
consolidation will not happen than the public sector banks will have painful journey ahead.
There is lot of views going in the market and on basis of that I concluded that some bankers are
against the consolidation because now-a-days PSB are fighting with lots of issues like NPA ,
fully implementation of Basel III by Mar 2019, facing losses in their balance sheets, have to
clear their balance sheet by Mar 2017 as it’s a deadline given by RBI Governor and adding one
more issue of getting merger with other banks will affect the working of banks and the bankers
views is that the government should focus first on clearing balance sheet of the bank and get
successfully implemented of BASEL III and after that on clearing balance sheet government
should go ahead with the merger.
But the consolidation of merging of PSB is not new and the past government UPA has tried in
their tenure to merge these PSB but due to some political issues and other factors they can’t go
ahead and this idea of merging putted into the dustbin but the NDA government and the Union
minister of state for finance Jayant Sinha comes with a road map for mergers of bank. The
government going ahead with this reform to get implemented strongly because the PSB is losing
their market value in the market and the future of public sector bank is not so bright so
government has to take some crucial steps in order to save PSB and the current situation of PSB
is that they doesn’t have enough deposits to funds large projects in the economy. The
government wants to consolidate PSB banks because of two reasons.
1. Government wants to make these PSB into bigger banks so that they can match the pace with
the demands of the economy.
2. Government doesn’t wants to pour more money in these banks as subsidy but they have
choice because of the bad condition of the bank so this consolidation will help government to
ensure that the capital goes to the more efficient banks and the weaker bank can merge with
these efficient banks.
There never is exact time in the economy for merging bank so government should go ahead with
this decision of consolidation of PSB and the benefits after consolidation is discussed below.

76 | P a g e
1. Increase in Size of Balance sheet:
This merger will increase the size of the balance sheet of bank and by which the lending
capacity of a bank will increase and bank will able to compete with international standards
banks. This merger allow bank to invest and finance loans for Infrastructure projects because
now-a-days bank are unable to lend much loan amount in infrastructural projects but with the
merger of banks will increase the lending capacity of banks and in turn bank can lend high loan
amount in big projects like infrastructure projects.
2. Low operational Cost:
These merger will help bank in cutting down of operational cost .Currently for example the SBI
and associates have number of branches in one area and if they merge the number of branches
will be less which help bank to reduce operational cost and also eliminate duplication of
branches and the other cost like deposit cost, electricity cost and other small expenses will also
get reduce and in turn this will help in increasing the profit of a bank in high margin.
3. More Geographical Touch:
Currently many of the banks doesn’t have exposure in many of the region like bank which has a
strong influence in north doesn’t have much depositors from south and vice versa . So this
merger will bring bank together and bank from their geographical influence will help other
partner bank to increase their business in their region and in turn it will help bank to increase
deposits from other regions.
4. Reduce Duplication of Loans:
This merger help bank to tackle with the NPA more strongly and will help policymakers to make
strong policy against defaulters and take appropriate action at right time. The merger will not
able to reduce NPA but they can bring transparency in giving Loan. For example If a contractor
got an infrastructural project from government then he go to one of the bank and get sanctioned
the loan amount for the project and then he gave this project to some other contractor and that
contractor will also give contract to some other contractor and each and every contractor will go
to bank and get sanctioned loan on behalf of project so if One project got busted due to technical,
political reason than the whole loan amount get affected and one project will affect 6-7 loans
which is taken from bank for same project by different contractors and this loan will consider as
NPA.
So by merging banks this bring transparency in working and this type of loans can be managed
and controlled by banks because now there is not number of banks where he can go for loan.
5. Single Treasury:

77 | P a g e
The merging will bring single treasury and there are not multiple treasury in public sector banks
which help government and RBI in turn to manage this six banks efficiently and effectively. It
will be easy for an RBI to manage these six banks and government and RBI can focus more on
the growth of these banks and help RBI to make stronger policy and make banks more stronger
in economy.
6. Low Manpower requirements:
The merger will help bank in slow down its recruitment process and the future recruitment will
not be conducted. Currently the PSB have given employment to more than 7.5 Lakhs at present
and most of the people will get retire in next 4-5 years and in future PSB will require more
manpower to carry forward their businesses and currently they have a opening of 40000
employee in this year and if merging happen than the recruitment of the banks will come down
which help bank to save lots of money from human resource and they can utilize their employees
in best efficient way.
OTHER BENEFITS TO CUSTOMERS
1. It gives the customers to use the wider range of ATM facility or network and which in kind
benefits the customers from ATM charges on cross banking.
2. It will help banks to increase their service delivery and make their operations fast.
3. Customers of smaller banks will get benefit and have access to more financial instrument like
mutual funds etc.

78 | P a g e
6. Learning from SIP
1 .The 2 months of summer internship at LKP SECURITIES LIMITED was like a full plate
of knowledge to me.
2. I have learnt the Corporate Working Culture along with the overall functioning of the
equity, derivate market and banking sector.
3. I have learnt the functioning of various verticals of banking sector in order to conclude the
combinations.
4. In equity research analysis I learn how to do fundamental analysis of a bank.
5. Deep study of balance sheet of banking sector.
6. Study of NPA and how NPA affecting banking profit and study of increasing trends of NPA in
banking industry.
7. Apart from this I have learnt the current market trends of the banking industry, importance of
fundamental analysis can help to analyze company.
8. Learn various aspects that how PSB is not able to make profits and what are the reasons
behind of not performing well in the sector.

79 | P a g e
7. References
I Magazines
1. Investor
2. Business India
II e-Newspapers
1. The Economic Times
2. The Business Standard
3. Indian Express
4. Hindustan Times
III. Published Material
1. RBI Guidelines Circulars
2. http://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!4
3. Report on Trend and Progress of Banking in India
4. Statistical Tables Relating to Banks of India
5. Master Circulars of RBI
6. https://www.iimk.ac.in
IV. Other Sources Internet Websites
1. http://www.rbi.org.in
2. http://www.worldbank.co.in/
3. http://www.firstpost.com
4. http://www.nseindia.com
5. http://www.bseindia.com/
6. http://www.bankofengland.co.uk
7. http://www.boc.cn/en/
8. http://www.federalreserve.gov
9. https://en.wikipedia.org
10. http://www.moneycontrol.com/

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