Post-M&A Efficiency in Indian Banking Sector: Insights From Data Envelopment Analysis

Abstract

Merger and Acquisition (M&A) in the Indian banking sector are driven by a combination of strategic, economic, and technological factors aimed at transforming the landscape of financial services. Hence, it becomes important to check the impact of M&A on the performance of banks in terms of efficiency improvements which are largely unchecked. This study examines the impact of mergers on the overall technical efficiency (OTE) of the Indian banking sector, utilizing a two-stage Data Envelopment Analysis (DEA) approach for analysis. The findings reveal that private-sector banks experience more significant efficiency improvements than public-sector banks. Interestingly, the Federal Bank and HDFC Bank emerge as highly robust institutions based on discriminant analysis. Logistic regression results show asset quality significantly boosts OTE for public sector banks, while bank size drives efficiency in private sector banks. These insights contribute to the literature on M&As and the banking efficiency of India's evolving banking landscape.