Impact of Amalgamation of RRBs on Financial Efficiency and Inclusion A Case of Karnataka RRBs

Abstract

Abstract:
Objective: The adoption of financial sector reforms in response to the economic crisis in the latter half of the nineties had resulted in a levy of spate of dynamic regulatory standards of global financial resilience on banks in India to enable them to operate in an increasingly competitive market environment. These include prudential norms on capital adequacy and NPA provisioning followed by (of late) bank mergers, ostensibly to bolster their financial viability and efficiency. The paper inquires into the impact of ‘Bank-mergers in the context of the amalgamation of RRBs as the policy response in regard to their impact on financial efficiency and financial inclusion across the period of the merger (1999-2011)
Methodology: The paper uses the ‘taxonomic method’ to develop a composite index independently for ‘financial efficiency’-and ‘financial Inclusion’ in order to compare the RRBs performance across the period of their amalgamation
Conclusion: It finds that the impact on the RRB amalgamation on financial efficiency has been largely ‘modest’ in the post-amalgamation period, and largely at the expense of their erstwhile mandate of being the ‘engine of financial inclusion’.