Bank Mergers — Set 3

Correct Answer: B. Andhra Bank

• **Andhra Bank** = along with Corporation Bank, merged into Union Bank of India on April 1, 2020; all Andhra Bank customers automatically became Union Bank customers. • **Both banks merged** — the question asks which bank's customers became Union Bank customers; Andhra Bank (option B) is the listed option that fits, though Corporation Bank customers also became Union Bank customers in the same merger. • Post-merger, Union Bank became one of India's largest PSBs with about ₹14.6 lakh crore in business and 9,500+ branches. • 💡 United Bank of India is wrong — UBI's customers became PNB customers (2020 OBC+UBI merger); Syndicate Bank is wrong — Syndicate customers became Canara Bank customers; Allahabad Bank is wrong — Allahabad customers became Indian Bank customers.

Correct Answer: B. Various Princely State Banks became associates

• **Various Princely State Banks became associates** = the State Bank of India (Subsidiary Banks) Act, 1959 converted eight state-owned banks of former princely states into SBI associate banks under SBI control. • **Eight associates** — the original eight were: SB of Bikaner & Jaipur, SB of Hyderabad, SB of Indore, SB of Mysore, SB of Patiala, SB of Saurashtra, SB of Travancore, and SB of Jaipur (later merged with SB of Bikaner). • This 1959 restructuring was distinct from a merger — the banks remained legal entities but operated under SBI's umbrella until their gradual absorption (2008, 2010, 2017). • 💡 Bank of Baghelkhand is wrong — it is an obscure entity not connected to the 1959 SBI Act; CoBank is wrong — it is an American agricultural cooperative bank; Imperial Bank of India is wrong — it was converted into SBI in 1955 itself, not 1959.

Correct Answer: A. HDFC Ltd

• **HDFC Ltd** = the parent housing finance company merged into HDFC Bank (its own subsidiary) in a reverse merger effective July 1, 2023 — the largest transaction in Indian corporate history. • **Global scale** — post-merger HDFC Bank became one of the world's top 10 most valued banks by market capitalisation, with a balance sheet exceeding ₹31 lakh crore. • The merger eliminated the holding company discount, allowed HDFC Bank to directly originate home loans, and unlocked massive cross-selling synergies across insurance, mutual funds, and mortgages. • 💡 Standard Chartered is wrong — it is a British multinational bank with no merger with HDFC Bank; Bandhan Bank is wrong — it is a separate private bank focused on microfinance; IDFC First Bank is wrong — it was formed by the IDFC Bank–Capital First merger in 2018 and is unrelated to HDFC.

Correct Answer: D. DBS Bank India

• **DBS Bank India** = subsidiary of Singapore's DBS Group, took over Lakshmi Vilas Bank (LVB) effective November 27, 2020 — the first instance of a stressed Indian private bank being merged with a foreign bank's Indian subsidiary. • **RBI-initiated rescue** — the RBI placed LVB under moratorium in November 2020 after years of mounting bad loans and failed capital-raising attempts; DBS India's strong capital base made it the chosen acquirer. • LVB was founded in 1926 in Karur, Tamil Nadu; its 563 branches were absorbed into DBS Bank India, giving DBS a significant retail expansion in India. • 💡 HSBC India is wrong — HSBC played no role in the LVB rescue; Standard Chartered is wrong — it is a separate foreign bank unconnected to this merger; Citibank is wrong — Citi exited Indian consumer banking in 2023 (sold to Axis Bank), not LVB.

Correct Answer: A. ICICI Bank

• **ICICI Bank** = merged Sangli Bank (a Maharashtra-Karnataka regional private bank) into itself effective April 19, 2007, expanding its rural and semi-urban reach. • **Rural footprint** — Sangli Bank had about 198 branches concentrated in rural Maharashtra and Karnataka; the merger gave ICICI Bank access to an underserved customer base ahead of RBI's rural expansion mandates. • Sangli Bank faced capital adequacy pressure; the RBI-approved merger protected its depositors and employees while allowing ICICI to grow inorganically. • 💡 Axis Bank is wrong — Axis had no merger with Sangli Bank; IndusInd Bank is wrong — IndusInd's notable mergers include Bharat Financial Inclusion (2019); HDFC Bank is wrong — HDFC's 2007 activity was the preparation for acquiring Centurion Bank of Punjab (completed 2008).

Correct Answer: B. Bareilly Corporation Bank

• **Bareilly Corporation Bank** = merged with Bank of Baroda in 1988, bringing a presence in the Bareilly division of Uttar Pradesh into Bank of Baroda's network. • **BOB's acquisition history** — Bank of Baroda has a long history of absorbing smaller banks; earlier mergers include Surat Banking Corporation (1969) and Tamil Nadu Central Bank (1980), showing its inorganic growth pattern. • The 1988 merger helped Bank of Baroda strengthen its foothold in North India's Gangetic belt, complementing its historically strong Gujarat base. • 💡 Traders Bank is wrong — Traders Bank was merged with Bank of Baroda in 1988 is a common distractor; however Bareilly Corporation Bank is the documented 1988 merger; The South Indian Bank is wrong — it remains an independent private sector bank; Banaras State Bank is wrong — it was merged with Bank of Baroda in 2002, not 1988.

Correct Answer: C. Unity Small Finance Bank

• **Unity Small Finance Bank** = the RBI approved the transfer of PMC Bank's assets and liabilities to the newly formed Unity Small Finance Bank in 2021, resolving a crisis that had started in September 2019. • **PMC crisis** — PMC Bank was placed under moratorium in 2019 after it was discovered that ₹6,500 crore in loans were fraudulently given to HDIL (Housing Development Infrastructure Ltd); depositors' withdrawal limits were severely restricted. • Unity Small Finance Bank was promoted by Centrum Financial Services and BharatPe specifically to rescue PMC Bank, marking the first time a co-operative bank was resolved through a small finance bank route. • 💡 AU Small Finance Bank is wrong — AU was not involved in PMC Bank's resolution; Suryoday Small Finance Bank is wrong — it had no role; SBI is wrong — SBI was not chosen for this resolution; Unity Small Finance Bank was specifically created for this purpose.

Correct Answer: B. Narasimham Committee I

• **Narasimham Committee I** = the 1991 committee chaired by M. Narasimham, former RBI Governor, officially titled 'Report of the Committee on the Financial System' — it is the foundational document of Indian banking reform. • **Key recommendations** — it called for interest rate deregulation, reduction of CRR/SLR, phased privatisation of PSBs, and consolidation into a three-tier bank structure to make Indian banks globally competitive. • The report was submitted in November 1991 during India's Balance of Payments crisis, giving the reforms urgency and political will. • 💡 Gadgil Committee is wrong — it focused on centre-state financial relations, not banking; Janakiraman Committee is wrong — it investigated securities market irregularities (1992 Harshad Mehta scam); Narasimham Committee II is wrong — the 1998 second report was titled 'Report on Banking Sector Reforms', not 'Committee on the Financial System'.

Correct Answer: A. Canara Bank

• **Canara Bank** = absorbed Nedungadi Bank, Kerala's oldest private sector bank (est. 1899, Kozhikode), effective February 1, 2003 after Nedungadi faced severe financial irregularities. • **RBI intervention** — the RBI directed the merger after Nedungadi Bank's finances collapsed due to mismanagement; Canara Bank was selected as the acquirer because of its South India roots and financial strength. • Nedungadi Bank held historic significance as the first private bank in Kerala; its failure and merger marked the end of an era in Kerala banking history. • 💡 State Bank of India is wrong — SBI was not the acquiring bank in this case; Bank of Baroda is wrong — it had no role in Nedungadi's resolution; Punjab National Bank is wrong — PNB is a North India-based PSB unconnected to this Kerala bank merger.

Correct Answer: C. Lower requirement for repeated recapitalisation

• **Lower requirement for repeated recapitalisation** = larger, merged banks have bigger capital bases, better credit ratings, and can raise funds from markets themselves — reducing the government's need to inject taxpayer money repeatedly. • **Fiscal saving** — between 2017 and 2020, the government injected over ₹3.5 lakh crore into PSBs; consolidation was seen as the structural fix to break this cycle by creating self-sustaining banks. • Stronger merged banks also generate higher retained earnings, maintain capital adequacy ratios independently, and attract private capital — all reducing the government's recapitalisation burden. • 💡 Increased tax on banks is wrong — bank mergers do not change the tax framework applicable to banks; Abolition of RBI is wrong — RBI is the independent central bank and has no connection to merger outcomes; Reduced dividend payments is wrong — stronger merged banks typically pay more dividends, not less, to the government as the majority shareholder.