An Evaluation of State Bank of India's Risk Profile and Financial Performance in the Pre and Post-Merger Era

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Bushra Shazli, lamaan Sami


In the preceding decade, the banking sector in India has undergone considerable advancements. This progression is attributed to the confluence of liberalisation, globalization, and technological innovations within the sector. PSBs find themselves confronted with formidable competition emanating from both private and foreign sector banks. Consequently, to endure and thrive within the market, banking entities have resorted to the adoption of diverse strategic measures. One such strategic approach entails the consolidation of banks through mergers. Thus, the present discourse seeks to underscore the imperative of scrutinizing the SBI merger in 2017—a seminal event representing the most substantial merger within the Indian banking industry to date.

This research endeavour is characterized by its profound nature, encompassing a comprehensive examination and comparison of the risk profiles of SBI and merged banks before the merger. Furthermore, the investigation extends to assessing the impact of the merger on the risk profile of SBI after the merger. The analytical process involved the meticulous examination of secondary data of SBI and merged banks, facilitated by the application of three pivotal financial ratios. The findings disclosed the subpar performance and elevated risk exposure of certain associate banks, thereby substantiating the imperative nature of their amalgamation with SBI. The outcomes of paired T-Test analyses divulged that a significant disparity was observed in CAR, credit deposit ratio, and the Net NPA to Net Advances Ratio (NNPP to NAR), indicative of the discernible impact of the merger.

In culmination, regression analysis was performed to appraise the influence of NNPP to NAR on the management efficiency and earning capability of SBI before and after the merger. The results unveiled a significant and adverse correlation between the NNPP to NAR and the Return on Average Assets Ratio, persisting across both periods. Conversely, concerning earning efficiency ratios, it was discerned that the RER and NPMR, before and after the merger were adversely and significantly affected by the NNPP to NAR.

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How to Cite
Bushra Shazli, lamaan Sami. (2024). An Evaluation of State Bank of India’s Risk Profile and Financial Performance in the Pre and Post-Merger Era. European Economic Letters (EEL), 14(1s), 216–225.