The committee recommended that the privatisation or merger of weak banks should

The committee recommended that the privatisation or

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be relevant only after enhancing the operational efficiency of the banks. The committee recommended that the privatisation or merger of weak banks should be considered as the last option. During the first stage the operational, organisational, financial and systematic restructuring should be undertaken. The operational efficiency could be attained only by adopting modern technology, reducing costs of operations, reducing the level of NPAs, improving practices of corporate governance, change of legal system, adopting staff rationalisation measures, enhancing the efficiency and involvement of bank management etc. In its recommendations the Working Group estimated that in the next three years the overall cost of restructuring the weak banks will be Rs. 5500 cr. Of which Rs.3000 cr. will be the capital infusion, Rs. 1000 cr. Will be the NPA buyout, staff rationalisation measures will cost Rs. 1100 to 1200 cr. and the technology up gradation will cost Rs. 300 to Rs. 400 cr. The Group also recommended the constitution of Financial Restructuring Authority. For speeding up the recovery process in weak banks, the committee recommended the setting up of Debt Recovery Tribunals to take their cases on a priority basis. But in the budget of 2000-01 the then Finance Minister announced the constitution of a Financial Restructuring Authority for each weak bank instead of a single Authority for all weak banks. Under the proposed framework, the statutes governing public sector banks would be amended to provide for the suspension of board of directors on the basis of recommendations of RBI and constitution of a FRA comprising experts and professionals. The amendments would also enable the FRA to exercise special powers, including all powers of the Board of the bank. The Government would also consider recapitalisation of the weak banks to achieve the prescribed Capital Adequacy Norms. Review of Literature A large number of studies examined various aspects of M&A in the Indian banking system. Many important books and research articles have been published. In this section of the chapter an attempt has been made to review some of the books and articles, existing literature dealing with the various aspects of bank consolidation. Goyal K.A. & Joshi vijay (2011) in their paper, gave an overview on Indian Banking Industry & highlighted the changes occurred in the banking sector after post liberalisation. This study examined the need for M&A in Indian banking. It also gave the idea of changes that occurred after M&A in the Indian banking sector in terms of financial, human resources and legal
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International Journal of Academic Research in Business and Social Sciences December 2013, Vol. 3, No. 12 ISSN: 2222-6990 228 aspects. It also described the benifits that come out M&A & examined that M&A is a strategic tool for expanding their horizon and companies like the ICICI bank has used merger as their expansion strategy in rural market to improve customer base and market share. The sample of 17 mergers of post liberalisation period was taken.
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