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Efficiency Study on Proposed Merger Plan of State Bank of India (SBI) and its Subsidiaries: A DEA Perspective

Efficiency Study on Proposed Merger Plan of State Bank of India (SBI) and its Subsidiaries: A DEA Perspective

Debaprosanna Nandy, Manas Kr. Baidya
Copyright: © 2012 |Volume: 1 |Issue: 1 |Pages: 17
ISSN: 2160-9837|EISSN: 2160-9845|EISBN13: 9781466615298|DOI: 10.4018/ijpmat.2012010101
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MLA

Nandy, Debaprosanna, and Manas Kr. Baidya. "Efficiency Study on Proposed Merger Plan of State Bank of India (SBI) and its Subsidiaries: A DEA Perspective." IJPMAT vol.1, no.1 2012: pp.1-17. http://doi.org/10.4018/ijpmat.2012010101

APA

Nandy, D. & Baidya, M. K. (2012). Efficiency Study on Proposed Merger Plan of State Bank of India (SBI) and its Subsidiaries: A DEA Perspective. International Journal of Productivity Management and Assessment Technologies (IJPMAT), 1(1), 1-17. http://doi.org/10.4018/ijpmat.2012010101

Chicago

Nandy, Debaprosanna, and Manas Kr. Baidya. "Efficiency Study on Proposed Merger Plan of State Bank of India (SBI) and its Subsidiaries: A DEA Perspective," International Journal of Productivity Management and Assessment Technologies (IJPMAT) 1, no.1: 1-17. http://doi.org/10.4018/ijpmat.2012010101

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Abstract

The Banking industry is undergoing unprecedented changes driven by consolidation through mergers and acquisitions all over the world. India is no exception. Merger of State Bank of India (SBI) and its subsidiary banks have been for several years, and SBI has already merged State Bank of Saurashtra (2008) and State Bank of Indore (2010) with itself. SBI management proposes to merge its five remaining subsidiaries within the next two fiscal years. The present paper measures and examines technical efficiency of SBI and its subsidiaries before and after their hypothetical merger. The study has utilized the two basic DEA models – CCR (Charnes, Cooper and Rhodes) and BCC (Bankers, Charnes and Cooper) to measure technical efficiencies of selected major Indian commercial banks before and after merger of SBI and its associates for the financial year 2009-10.The results reveal that the merger proposal of SBI associates may bring in fully technical efficiency but not fully scale efficiency of the merged entity. In order to be fully technical and scale efficient, merged SBI has to reduce its present number of employees substantially and should follow the prudent operating practices of three peer banks namely Corporation Bank, Axis Bank and Federal Bank.

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