An Assessment of Financial Implication of Mergers and Acquisitions on Liquidity and Profitability of Public Sector Banks in India.

Abstract

The Indian banking sector has witnessed significant consolidation through mergers and acquisitions (M&A), particularly among public sector banks, as a strategic response to globalization, competitive pressures, and structural weaknesses. This study examines the financial implications of mergers and acquisitions on the liquidity and profitability of selected public sector banks in India. Using secondary data sourced from published financial statements, the study evaluates pre- and post-merger performance over an extended period by applying key liquidity and profitability ratios. Paired sample t-tests are employed to assess the statistical significance of changes attributable to mergers. The findings reveal that, except for selective changes in asset composition—most notably the Term Loan to Total Advances ratio—mergers have not resulted in statistically significant improvements in liquidity or profitability in the short to medium term. The results suggest that public sector bank mergers primarily contribute to financial stability and structural realignment rather than immediate efficiency or profitability gains. The study underscores the long-term nature of merger synergies and the importance of effective post-merger integration.