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• Similarly, the market image and brand name of the consolidated entity will always likely to get a boost in comparison to the individual banks. This will lead to a better market image, which in turn translates to better performance expectations by the investors and the analysts, thus finally leading to better valuations in the market. We know, that better market valuations mean better shareholder returns leading to an even better market image. Thus, a reinforcing vicious cycle would set in.

• The larger size, greater geographical penetration and enhanced market image and other synergic factors would inevitably increase the bargaining power of the new bank. In a competitive world where the battle is fierce, a better bargaining power position is always an invaluable asset.

• The business in near future is unlikely to remain localized but bound to go global. In view of the saturating environment at domestic front, banks will have to venture overseas without any hesitation. Initial foray into overseas markets are always made through strategic alliances and joint ventures. A merged entity with bigger market size, greater geographical spread, sound financial position, good image, greater resistance etc. would necessarily be successful in the overseas. All these virtues also help in acquiring tenders and bids.

• The consolidated entity can serve the end user i.e. the customer in a better way through providing single window service by offering a variety of services like conventional banking, merchant banking, mutual funds, insurance etc. under one umbrella leading to innovation and origin of new hybrid products and services like bancassurance.

Risk Associated With Consolidation

There are several risks associated with consolidation and few of them are as follows: -

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* Contributed by -
Pritesh Y. Chothani, Ritesh Sud & Rachna Srivastava,
PGDBM 2006,
IMT, Ghaziabad.