Analyzing the Financial Performance of Indian Public Sector Banks before and after Megamerger by Using CAMEL Model

Abstract

The main motive of this research was to assess the financial performance of public sector banks before and after the Megamerger announced by the Government of India consolidating 10 public sector banks into 4. The impact of the merger on the bank’s performance was measured and compared to judge its effectiveness. One of the most crucial practices of evaluating the performance of a bank involves critical examination of account statements and assessment of CAMEL model ratios i.e., Capital Adequacy, Asset quality, Management efficiency, Earnings, and Liquidity to meet monetary obligations of the bank. The four acquirer banks including Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank was purposively selected to study the impact of mergers on their financial performance. The study was performed by collecting data for two years before and two years after the merger. The data for the research was collected from the annual financial statements of the selected banks for a period of four years 2018-19 to 2021-22. The paired t-test is used as inferential statistics to draw a conclusion based on a comparative analysis. Based on the results of the analysis it could be concluded that there observed a significant difference in the financial performance of Indian banks after the merger, whereas for the other banks there was no significant difference in the performance.